Malaysia's gross domestic product (GDP) expanded by 5.2% in the fourth quarter of 2011 despite the challenging external environment as domestic demand continued to support growth.
Bank Negara said in a press statement that full-year growth came in at 5.1% after expanding 7.2% in 2010 as domestic demand conditions remained favourable supported by both private and public sector spending.
The fourth-quarter GDP figures came in slightly higher than the 4.8% median estimate in a Bloomberg survey while the full-year growth was largely in line with a separate survey, where the median estimate was 5% and in line with official estimates of 5% to 5.5% growth.
“Domestic demand expanded by 10.5% during the quarter, driven by the continued expansion in household and business spending, and public sector expenditure,” the central bank said.
Private comsumption increased by 7.1% supported by favourable income growth while public consumption rose by 23.6% following higher expenditure on emoluments and supplies and services.
Gross fixed capital formation, which measures the net increase of fixed or physical assets, increased by 8.5% supported by continued expansion in capital spending by the private sector and the non-financial public enterprises.
“The federal government development expenditure during the quarter was mostly channelled into the transportation, trade and industry sectors,” the central bank said.
The services sector grew by 6.4% for the quarter (6.8% for the year), manufacturing expanded by 5.2% (4.5%), construction rose 6.4% (3.5%), agriculture expanded by 6.9% (5.6%) while the mining sector's pace of decline narrowed compared to the third quarter, falling by 3.3% and declining 5.7% for the year.
The headline inflation rate, as measured by the annual change in the consumer price index, declined to 3.2% in the fourth quarter with inflation in the transport category ower at 3.2% reflecting the absence of further adjustments on prices of RON95 petrol, diesel and LPG in the quarter.
“Inflation in the food and non-alcoholic beverages category, however, rose to 5.3% during the quarter, mainly due to higher prices in the fish and seafood subcategory,” Bank Negara said.
Economists said the latest data confirmed earlier reports of the country's growth being on a slower trend largely due to the drop in external demand as global growth slowed.
They said this trend would continue into the first half of this year before recovering gradually in the second half as conditions globally improved with more clarity on the issues surrounding the eurozone sovereign debt crisis.
CIMB Investment Bank Bhd economic research head Lee Heng Guie told StarBiz that the main drag to growth in the fourth quarter and the whole year was the volatile external environment which resulted in stagnant demand for consumer electronics.
He said domestic demand would continue to sustain the economy although there was “a slight let-up” in consumer spending. “The question is how sustainable is consumption going to be and this will depend on key drivers such as commodity prices and income,” Lee said, noting that the Malaysian Institute of Economic Research consumer sentiments index was trending down.
“In summary, we see quite uneven growth in the first half of this year before the economy picks up in the second half,” he said, expecting full-year GDP to come in at 3.8%.
AmResearch Sdn Bhd director of economic research Manokaran Mottain said the latest data showed that the “fear factor” was rising with households becoming more cautious about spending.
However, he was more sanguine compared to his peers where exports were concerned, pointing to the export growth in goods and services (where the current account suplus, although narrowing in the fourth quarter, stood at RM22bil for the year) but said the data showed the economy was geared to domestic activity with government handouts playing a crucial role in supporting consumption.
“Going forward, well-crafted domestic strategies and the timely rollout of the Economic Transformation Programme projects will now be more urgent as they will create multiplier effects especially in the services sector,” Manokaran said.
He added that the data clearly showed that the economy, while experiencing moderating growth, was not “falling off the cliff” with full-year growth in 2012 coming in at 5%. “The worst-case scenario is global growth dropping to below 3% and project implementation delays at home, which means growth of around 4%,” Manokaran said.
Meanwhile Affin Investment Bank Bhd chief economist Alan Tan said growth this year would still be affected despite signs of nascent recovery in the United States and the improvement in global purchasing managers' indices.
“For this year, the first half will still show signs of moderation in exports as consumer electronics demand slows down,” he said, adding that growth for the full year would still be a healthy 4% considering the challenges.