It is the final GDP release before the year goes to the dogs! The Department of Statistics will announce the fourth quarter figures tomorrow at noon. Before that, let us play a game:
How fast do you think did the Malaysian economy expand in 4Q17 from a year ago?
- 4.5% or slower (13%, 3 Votes)
- 4.6%-5.0% (13%, 3 Votes)
- 5.1%-5.5% (22%, 5 Votes)
- 5.6%-6.0% (43%, 10 Votes)
- 6.1%-6.5% (0%, 0 Votes)
- Faster than 6.5% (9%, 2 Votes)
Total Voters: 23
For some context, the year 2017 was a pretty good year for GDP growth. It came after a pretty bad two-year period that in large part caused by the GST-shock to the economy.
But the fourth quarter growth is unlikely to be faster than the 6.2% yearly expansion we experienced in the July-September period. The third quarter was the peak and it was extraordinary. Even the 5.8% year-on-year growth in the second quarter now seems slightly on the high side.
You could see that industrial production has taken a break from the pace it grew for much of last year. Hot export and import growth are tapering off, with the volume index growing at a more modest pace now. There will be no more double-digit growth in the near future. Improving foreign exchange rates for the ringgit (with the exception against the Euro) will also keep export growth from flying off as it did from December 2016 to November 2017. Money supply growth is stabilizing after climbing for much of 2017 from a trough.
Change in government spending would be super-interesting this time around since the general election is just around the corner. Other GDP components like consumption and investment would likely expand at a rate not too different from the recent quarters.
Whatever the fourth quarter GDP growth would be, the first nine-month strong growth has translated well in the labor market. Seasonally-adjusted unemployment rate fell to 3.3% in December after staying at 3.5% for the longest time. So, consumption growth seems sustainable and okay in light of labor market improvement.
This happens at a time when core inflation has also fallen, suggesting potential output for the economy may have risen up, which is good news. As a result, unemployment rate could probably drop further with little impact on demand-pull inflation. I think this may also mean another rate hike by the central bank might be unnecessary this year, if things go as it is now.
Oh, happy lunar new year. Given how things are happening with the dogs here in Malaysia, I already cannot wait for the year of the pig. Too oinking exciting.