The Malaysian economy expanded at a faster pace of 5.8% in the third quarter (3Q) of 2011 but whether the growth momentum could continue in the fourth quarter was still uncertain, said Bank Negara Malaysia Governor Tan Sri Dr Zeti Akhtar Aziz.
She said the stronger 3Q growth was due to robust domestic demand, driven by the expansion in both household and business spending as well as higher public sector expenditure.
However, for the fourth quarter, the uncertainties were due to the negative developments in the external economic environment, she said at a press conference on Friday.
“The risk to the global economic growth has increased following developments that had taken place in the third quarter and it is very likely that some of this impact will be experienced in fourth quarter and this will indeed as Malaysia is currently an open economy and it will affect our external sector,” she said.
Zeti said the domestic economy would continue to post healthy growth in the fourth quarter, as some of the public sector investments especially infrastructure investments would be implemented by the end of the year.
“We saw in the first half this year there were slow implementation of some of the projects but this has gathered momentum in the third quarter and we expect it to continue in the fourth quarter. So it remains to be seen to what extent the external demand will affect our overall economic growth,” she said.
In the first and second quarter of 2011, gross domestic product (GDP) growth was recorded at 5.2% and 4.3%.
In the third quarter, domestic demand expanded by 9.0% on-year compared to 5.6% in the second quarter, driven by the expansion in private sector spending and higher public sector expenditure. All second quarter data are in parentheses.
Private consumption increased by 7.3% in the third quarter (6.4%), in line with favourable income growth. Public consumption expanded by 21.7% on-year (6.6%) following higher expenditure on emoluments and supplies and services, as well as bonus payments in 3Q.
Gross fixed capital formation increased by 6.1% on-year in the third quarter (3.2%), supported by higher public sector capital spending, particularly the non-financial public enterprises, and continued expansion in private sector investment, according to the central bank.
On the supply side, growth in most economic sectors strengthened in the third quarter, with agriculture sector expanding at the highest rate of 8.2% on-year (6.9%).
The strong agricultural growth was underpinned by the strong production of both crude palm oil and natural rubber.
In the services sector, growth was supported mainly by domestic driven activity, which saw the sector expanding 7.0% on-year (6.8%). However, the mining sector continued to contract by 6.1% (9.2%) as output of crude oil was affected by the shutdowns of production facilities.
Zeti said the resumption in the supply chain disruption in key manufacturing sector as a result of the earthquake and tsunami which struck Japan earlier this year had contributed to the higher growth in the manufacturing sector in the in the third quarter.
The manufacturing sector expanded at a faster pace of 5.1% on-year (2.1%), reflecting the improvement in the supply chain and the robust performance of domestic oriented industries.
“In the third quarter we saw a resumption in the supply chain disruption and this was a positive development and we also saw commodity prices remained high and this was contributed in some of the producers of commodities especially in the rural areas,
“So all these contributed to increased spending and it will be, at this point in time, uncertain as to the growth of the fourth quarter, except to say that domestic demand will remain strong,” she explained.