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Standard Chartered analysts note that Malaysia’s economy surprised to the upside in Q2-2019, growing 4.9% y/y, versus 4.5% y/y in Q1.

Key Quotes

“Private consumption remained the main growth driver, contributing 4.4ppt to overall GDP growth, although we expect consumer spending to ease in the coming quarters. Investment weakened in Q2; public investment led the decline, falling 9% y/y (Q1: -13.2% y/y), while expansion of private investment was relatively weak, at 1.8% y/y. Export growth was soft, as expected, at 0.1% y/y. Imports contracted by 2.1% y/y; as a result, net exports added 1.4ppt to growth.”

“H1-2019 growth of 4.7% was at the upper end of the government’s full-year forecast range of 4.3-4.8%. Given the negative global economic environment, we expect H2 growth to ease versus H1. Nonetheless, the economy has proven relatively resilient so far, giving Bank Negara Malaysia (BNM) room to calibrate its policy response to lingering global uncertainties, in our view.”

“Our core scenario is that BNM will choose to ‘wait and see’ this year, but the risk of another pre-emptive rate cut rises if global trade tensions worsen and domestic demand eases faster than we anticipate. We maintain our GDP growth forecast of 4.6% for 2019.”