Economy

Malaysian economy picks up speed in Q4, but bumps lie ahead

Shoppers at the Pavilion Mall shopping center in downtown Kuala Lumpur, Malaysia.
Sanjit Das | Bloomberg | Getty Images

Malaysia's economy surprisingly picked up speed in the fourth quarter on strong construction and manufacturing activity, boosting full-year growth to its fastest in four years.

Gross domestic product for the fourth quarter grew 5.8 percent, exceeding the median forecast of 5 percent in a Reuters poll, and picking up from 5.6 percent in the third quarter.

The stronger-than-expected momentum lifted full-year growth in 2014 to 6.0 percent, the fastest pace since 2010, and beating economists' forecast of 5.8 percent.

However, economists said that Malaysia's strong economic performance might not last as it confronts sluggish global demand for its exports and weak energy and commodity prices.

"This acceleration will likely prove short-lived as lower oil prices will be a major headwind for the economy this year," Krystal Tan at Capital Economics said in a note.

The consultancy noted that the government would have to cut spending further to achieve its deficit-reduction targets amid declining resource revenues.

On a seasonally adjusted quarter-on-quarter basis, GDP grew by 2 percent, up from 0.9 percent in the third quarter.

"Domestic demand remained the anchor of growth in the fourth quarter," the central bank said in a statement.

Private consumption rose an annual 7.8 percent in the fourth quarter, up from 6.7 percent in the previous quarter.

Meanwhile, private investment growth accelerated to 11.2 percent from 6.8 percent.

But the slump in demand for commodities weighed on exports. Shipments of goods and services slowed to 1.5 percent from 2.8 percent in the third quarter.

Imports, meanwhile, accelerated to 2.6 percent from 2.2 percent.

The central bank said the current account surplus narrowed to 6.1 billion ringgit ($1.7 billion) in the fourth quarter from 7.6 billion ringgit in the prior quarter.