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19th August, 2010
KUALA LUMPUR: Malaysia recorded a strong growth of 8.9 per cent in the second quarter of 2010 compared with 10.1 per cent in the first quarter, driven by sustained expansion in domestic demand and robust growth in external demand.
In the second-quarter of last year, it recorded -3.9 per cent growth.
Bank Negara Malaysia governor, Tan Sri Dr Zeti Akhtar Aziz, said for the first half of 2010, the economy grew by 9.5 per cent against -5.1 per cent in the same period of 2009.
“The stronger domestic demand was due to higher spending by the private and public sectors while expansion in external demand spurred domestic production.
“The external demand benefited from an increase in demand from regional economies for commodities in particular, crude oil and natural gas,” she told a media briefing to announce the growth figures here yesterday.
Zeti said in the second quarter (Q2), domestic demand expanded by nine per cent (Q1 2010: 5.3 per cent) due to higher private consumption and continued improvements in both business and public sector spending.
“Private consumption grew by 7.9 per cent (Q1 2010: 5.1 per cent) on favourable labour market conditions, relatively low inflation and a steady increase in income levels,” she said.
She said the public sector contributed positively to growth, with public consumption expanded by 6.9 per cent, following higher expenditure on emoluments.
On the supply side, she said, major economic sectors continued to record strong growth during the quarter, led by the manufacturing and services sectors.
“The manufacturing sector grew at a sustained pace of 15.9 per cent (Q1 2010: 17 per cent) with broad-based growth across all clusters.
“The services sector grew by 7.3 per cent (Q1 2010: 8.5 per cent) due to strong performance of the wholesale and retail trade; finance and insurance; and, transport and storage sub-sectors,” she said.
The governor said the construction sector expanded by 4.1 per cent during the quarter (Q1 2010: 8.7 per cent) on strong growth in the non-residential sub-sector.
Growth in the agriculture sector moderated to 2.4 per cent (Q1 2010: 6.8 per cent) due to lower production of industrial crops, while the mining sector registered a growth of 1.9 per cent (Q1 2010: 2.0 per cent) on higher production of natural gas amid lower production of crude oil, she said.
On the external front, Zeti said, the trade surplus narrowed to RM23.4 billion in Q2 (Q1 2010: RM38.9 billion) as gross imports increased faster than gross exports.
“Gross exports grew by 21.7 per cent (Q1 2010: 30.7 per cent) on robust demand for electrical & electronic (E&E) products and sustained demand for non-E&E exports and minerals, particularly from the regional economies.
“Gross imports expanded at a robust pace of 30.3 per cent (Q1 2010: 35.1 per cent), driven by strong growth of imports of intermediate and capital goods.
“Intermediate imports rose in tandem with the growth in manufactured exports, while the higher capital imports reflected improved domestic capital spending activity,” she said.
In addition, the expansion in consumption imports was driven by imports of food and beverages and motor vehicles, in line with the improvement in private consumption, she said.
Zeti said on a cash basis, gross inflows of foreign direct investments (FDIs) amounted to RM4.7 billion in Q2 (Q1 2010: RM4.9 billion).
“After adjusting for gross outflows due to repayment of inter-company loans, net FDIs recorded a larger net inflow of RM1.8 billion (Q1 2010: +RM0.2 billion).
“During the quarter, FDIs were channelled mainly into the E&E as well as petroleum-related industries,” she said.
She said net direct investments abroad by Malaysian companies amounted to RM2.5 billion in Q2 (Q1 2010: -RM3.2 billion), largely for investments in the services and oil and gas sectors.
“There were further inflows of portfolio investments of RM6.6 billion in Q2 (Q1 2010: +RM3.8 billion) due to strong foreign participation in debt securities,” she said.
The headline inflation rate, as measured by the change in the Consumer Price Index (CPI), increased by 1.6 per cent on an annual basis in Q2 (Q1 2010: 1.3 per cent), she said.
The ringgit, she said, appreciated against most regional currencies in the range of 0.1 per cent to 8.8 per cent.
“The ringgit appreciated by 0.5 per cent against the US dollar as signs of further economic recovery in the region contributed to favourable investor sentiments towards the regional financial markets.
“It also appreciated against the euro (10.2 per cent) and pound sterling (0.5 per cent). It, however, depreciated against the yen (-4.8 per cent),” she said.
Zeti said the recovery of the global economy was uneven in Q2 as the sovereign debt crisis in the euro area escalated.
“Major advanced economies achieved a moderate recovery following improvements in private sector demand, but consumer and business sentiments eased towards the later part of the quarter given the uncertainties arising from the sovereign debt crisis in several economies,” she said.
Meanwhile, most regional economies continued to sustain strong growth in the second quarter, supported by robust domestic and external demand, she said.
“There is increased risk of a moderation in the global growth momentum following rising concerns over the ongoing sovereign debt crisis and the planned fiscal consolidation in several advanced economies,” she said.
Going forward, Zeti said, the domestic economy was expected to remain strong, sustained by robust private sector demand.
“While external developments may result in a moderation in the pace of growth, favourable employment conditions, sustained consumer and business sentiments, moderate inflation and an accommodative policy environment are expected to encourage domestic economic activities, while external demand would continue to be supported by regional demand,” she said.
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