Malaysia's growth slows to 5.6% in third quarter

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Malaysia's economy grew at its slowest pace this year during the third quarter, as annual growth slipped to 5.6 percent from a revised estimate of 6.5 percent growth in the previous quarter, with exports struggling against a fragile global economy.

The third quarter growth matched the median forecast from a Reuter's poll of economists. Expectations for the Southeast Asian economy were subdued as exports have slowed considerably following a robust first half. [ID:nL3N0T048S]

Central bank Governor Zeti Akhtar Aziz pointed to supportive domestic factors that would underpin economic growth.

"Malaysia's economy is expected to remain on a steady growth path. While private consumption may moderate, investment activity will be supported by the continued flow of ongoing and new projects by the private and public sectors," Zeti told reporters after the data was released on Friday.

The central bank kept its forecast for full year growth between 5.5-6.0 percent in 2014 and between 5.0-6.0 percent in 2015.

According to the Reuters poll, Malaysia's economy is expected to grow at 5.8 percent this year. As uncertainties looms over the global economy, some analysts, however, have turned more pessimistic.

"Our expectation is that 2015 GDP will continue to disappoint the consensus. We are calling for a below consensus number of 4.8 percent next year," said Michael Wan, an economist at Credit Suisse in Singapore.

"Credit growth has been slowing. GDP is moderating. I don't see any medium-near term impetus for the central bank to raise its policy rates yet," he added.

The central bank raised its policy interest rate in July, but has so far refrained from following up with another increase.

The inflation rate, measured by the consumer price index, averaged 3.0 percent between July and September, moderating from 3.3 percent in the second quarter.

Moving forward, slower growth

Zeti said while domestic demand will remain the key driver of growth, exports could moderate on the back of weaker commodity prices.

"Although exports will benefit from the recovery in the advanced economies and from regional demand, the trend is likely to moderate reflecting both the high base effect from 2013 and lower commodity prices," the governor said.

Malaysia's current account surplus narrowed to 7.6 billion ringgit ($2.28 billion) in the third quarter from 16 billion ringgit in the previous quarter.

Export growth eased to 2.8 percent in the third quarter from 8.8 percent in second, while import growth weakened to 2.2 percent from 3.9 percent.