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The Malaysian economy recovered strongly in the fourth quarter amid strengthening domestic and external demand.
Gross domestic product recorded a positive annual growth of 4.5% in the fourth quarter, after shrinking 1.2% in the prior quarter, data published by the Bank Negara Malaysia showed on Wednesday. The increase was larger than the consensus forecast of 3.2%. The downturn of the global economy had badly affected the Malaysia's economy in the first three quarters.
For the year of 2009, the GDP contracted 1.7%, much smaller than the 3% decline estimated by the government.
Prime Minister Najib Razak said, "Overall, the Malaysian economy has turned around and recovered from the implications of the global crisis." Activities in the construction sector expanded strongly by 9.2%, benefiting primarily from the accelerated implementation of projects under the fiscal stimulus packages and the Ninth Malaysia Plan, he added.
According to economists at Capital Economics, positive growth trends would continue in the coming quarters, even as monetary and fiscal stimulus measures are withdrawn. However, given the prospect of only weak demand from the U.S. and Europe, GDP growth is expected to slow in 2011.
The manufacturing sector showed an increase of 5.3% in the fourth quarter, rebounding from the 8.6% fall in the third quarter. By contrast, mining and quarrying output slipped 2.8%. The agriculture sector registered a positive growth of 6%, following 0.5% drop in the previous quarter.
The implementation of the fiscal stimulus measures had gained further momentum in the fourth quarter, providing an additional impetus to growth. Private consumption spending grew at a pace of 1.7%, faster than the 1.5% increase seen in the previous quarter. Total final consumption expenditure slackened its pace to 1.6% in the fourth quarter of 2009 due to the government final consumption expenditure, which slowed down to 1.3%.
Gross fixed capital formation turned around to register a positive growth of 8.2% during the quarter. The external sector performed favorably with both exports and imports turned over by 7.3% and 6.9%, respectively.
Separately, data from the Department of Statistics Malaysia showed an acceleration in consumer price inflation in January. Annual inflation stood at 1.3% in January, up from 1.1% in the previous month. Economists were looking for an increase of 1.5%. On a monthly basis, the CPI increased 0.2% in January.
Capital Economics expect the central bank to lift policy rates next week. Economists said the policy rates only need to climb 75 basis points during the course of 2010, to 2.75% by year-end. The central bank had left the overnight policy rate unchanged at 2% in the fourth quarter.
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