Petaling Jaya (The Star/ANN) - Economic data released by Bank Negara on Wednesday showed that domestic demand remains the engine of growth for Malaysia as external headwinds drag exports lower.
The country's gross domestic product (GDP) grew 5.2 per cent in the fourth quarter of 2011 compared with the same period a year ago, while full-year growth came in at 5.1 per cent after expanding 7.2 per cent in 2010.
Economists pointed out that GDP expansion was again supported by favourable domestic demand conditions on resilient private sector spending and an acceleration in public sector spending.
Citigroup Inc senior economist Kit Wei Zheng said in a report that growth was driven by broad-based acceleration in domestic demand.
This was especially with Government consumption growth accelerating to a 12-year high and contributing 4.1 percentage points to headline growth as spending was ramped up on higher emoluments (in particular the half month civil servant bonus paid in December) and supplies and services, he said.
"Private consumption remained robust at 7.1 per cent year-on-year and contributed 3.8 percentage points to headline growth.
"Meanwhile, fixed investments growth continued to accelerate to 8.5 per cent year-on-year and contributed 1.8 percentage points to headline growth, driven by private sector and non-financial public enterprise capital spending,¿ he said.
Hong Leong Investment Bank Bhd research head Low Yee Huap said that on the demand side, growth in the services sector eased mainly due to a sharp moderation in real estate and business activities, in line with the less buoyant property and stock market activities during the quarter.
However, resilient consumer spending continued to buoy the communication and transport sub-sectors.
"Despite the drag from further decline in eletrical and electronic output, the manufacturing sector managed to sustain its growth at 5.2 per cent year-on-year, supported by higher output growth in the domestic-oriented industries, that is, transport equipment and food industries,¿ he said.
Low said growth in the construction sector more than doubled to 6.4 per cent , led mainly by the residential and civil engineering sub-sectors, whereas the agriculture sector grew at a moderate rate as crude palm oil output peaked in October.
"Meanwhile, the mining sector registered a smaller decline of 3.3per cent , affected by the continued drop in crude oil output amid marginal rebound in natural gas production.¿
CIMB Investment Bank Bhd economic research head Lee Heng Guie said in a report that although growth in aggregate domestic demand remained strong at 10.5 per cent in the fourth quarter of 2011 and 8.2 per cent for the year, there could be a further cooling of growth to between 5 per cent and 6per cent on softer consumer spending and investment activities.
He said private consumption grew at a slower pace as households spent less on discretionary items, with car sales declining by 2 per cent and imports of consumption goods moderating to 25.4 per cent from 26.5 per cent for the quarter.
"Although consumption credit growth recorded a higher rate of 9.6 per cent in the fourth quarter, we think it will not be sustainable as slowing economic expansion will continue to dampen credit demand,¿ Lee said.
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