What you need to know from Malaysia's surprising 5.6% GDP

Private consumption and investment spending were growth drivers.

According to Nomura, for the full year of 2012, Malaysia's GDP growth was 5.6% from 5.1% in 2011. Nomura also adds, Malaysia's economy expanded 6.4% y-o-y in Q4 from 5.3% in Q3, racing ahead of market expectations (Consensus and Nomura: 5.5%). 

Here's more:

On the demand side, growth in all key components slowed in Q4, but remained strong nonetheless. Growth in private consumption (6.1% y-o-y in Q4 from 8.5% in Q3) and investment spending (15% from 22.7%) remained relatively robust in Q4, while government spending surprised to the downside, easing to an eight-quarter low of 1.1% y-o-y from 2.3% in Q3.

Overall, domestic demand remained the key driver of Q4 GDP growth, contributing 6.9pp to headline GDP growth in Q4 (from 9.8pp in Q3). Import growth, which has been strong over the past few quarters consistent with the strength in domestic demand, surprisingly contracted by 0.9% y-o-y in Q4 from +4.4% in Q3.

As a result, the negative contribution from net exports narrowed to 0.6pp in Q4 from -6.8pp in Q3, despite export growth remaining subdued. We believe this is unlikely to be sustainable. On the supply side, the biggest upside surprise came from the agriculture sector, which grew 5.6% y-o-y in Q4 from 0.5% in Q3. 

According to the Department of Statistics this was largely due to an 11.7% increase in the palm oil and livestock sectors because of higher crude palm oil production and stronger demand for poultry, respectively.

Growth in the manufacturing (5.8% versus 3.3% in Q3), mining (4.3% versus -1.2%) and construction sectors (18.1% from 18.3%) remained strong in Q4 and in line with our forecasts. 



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