The GDP in the third quarter grew respectably at 5.0% from the same quarter last year. I think it is the most satisfying growth in a long time. I have not checked for the base effect but consumption grew strongly and net exports did well. It was a plain old growth in the simplest terms, no mathematical quirks. I cannot say much, because I have written most of the stuff I wanted say for work.
But I can share you this chart, which shows what contributed to the GDP growth.
It was a good quarter. Growth with solid foundation, domestically and externally. And it is pretty much close to my internal target (although for the wrong reason: I had expected exports to drive the GDP growth, but it was consumption instead.)
I am unsure why consumption was that strong. I will look into it later. Or wait for somebody to look into it. Hint hint.
I have not been this optimistic in a long time. I was right for being bearish for 1Q2013 and 2Q2013. I have also mentioned that 2Q growth would have been much worse if it was not for government spending. Even for the 4Q2012 when actual growth beat all estimates, I was not too impressed. Only the politicians were crowing about it.
All that was caused by weak trade.
I think I will be right to smile a little this time around.
Export growth recovered in the third quarter after months dragging the economy down. The trend had been so bad that some people worried Malaysia might experience current account deficit for the first time in ages. But the recovery in export growth, I think, has pushed the concern behind, especially with the decision by the US Federal Reserve to prolong its monetary stimulus. Having Janet Yallen as the chairwoman also helps, I suppose.
The bad news is that some revisions might be in order for last year’s GDP growth. I have noticed the authority revised last year’s trade numbers down by about 1o basis points in its recent release. We will see how they revised last year’s growth. The GDP in 3Q2012 grew 5.3% from the same quarter the year before. But that is the past. Nobody really quite cares for the past.
I am unsure how government spending changed during the quarter but I have imputed a very low growth in my projection. It is the post-election quarter anyway. There was less temptation to spend money in a big way. Furthermore, there was this sudden panic about government finance because of what Fitch Ratings did last quarter.
Private consumption might have grown slower as well, by a little tiny weeny bit because of the gasoline and diesel subsidy cut, but I think it was not too bad as to negate good news from the improved trade figures during the quarter. In any case, private consumption growth should be around 7.0% still, and that is healthy by any mean.
Investment in terms of gross fixed capital formation might have improved as well because there was no more election. The greater clarity in terms of political outlook should increase confidence.
Because of this, I am expecting growth for the third quarter to be faster than 5.0% year-on-year. I would like to be crazy and say it would be closer to 6.0% year-on-year, but that would be me being too excited.
The official GDP estimate will be released by the Department of Statistics on Friday, November 15 2013. To journalists, note that it is the Department of Statistics, not the Bank Negara Malaysia.
So…
How fast do you think did the Malaysian economy grow in 3Q2013 from a year ago?
This chart can be a bit confusing but it essentially shows the contribution of the four GDP components to Malaysia’s overall real GDP growth.
This is exactly the reason why I said it was all government spending previously (okay, all is not exactly accurate. It was a significant contributor, if you like). You can see how the government spending portion suddenly appeared strongly in the second quarter of 2013, while investment and consumption’s contribution shrank. Change in net exports was less bad but in terms of year-on-year contribution, it was less than the change in government spending by a huge margin.
Why did government spending go up?
It was the election as mentioned before (by the way, just to be clear, government spending here is more than federal government spending. Federal government spending was really decent, in contrast of the GDP numbers).
In some ways, the election was a de facto stimulus for the economy. The timing of the election was a fortunate accident. Overall growth would have been far worse without the increase in government expenditure. I calculated that if there were no government expenditure growth at all, the GDP would have expanded by about 2.0% YoY only.
Malaysia’s GDP grew 4.3% YoY in the second quarter of 2013, slightly faster than 4.1% YoY in the previous quarter.
While it is faster growth, I find the numbers worrying because if it was not for government spending, overall growth would have been much worse. Investment growth was down, private consumption was down and exports contracted.
The government spending was just because of electioneering. Election saved Malaysia. Really (This can be confusing since federal government spending actually decreased from a year ago. Yea, I was surprised to find that out. The GDP government spending includes non-federal government spending. Please take note of that).
The good news is that, I think things will be brighter from now on. Investment should increase because there is more political clarity moving out of the second quarter.
It is that time again. Malaysia’s Department of Statistics will release the second quarter GDP figures on August 21. Growth in the first quarter was 4.1% YoY no thanks to eroded trade surplus. Domestic demand however held up well and prevented the growth figure from being worse.
The situation on the trade surplus front has worsened tremendously over the second quarter. In fact, some private economists are fretting over the possibility of Malaysia experiencing its first trade deficit in a long time as exports have been doing really bad.
I think exports will improve in the second half of the year. Imports of intermediate goods have grown faster in June while imports of capital goods contracted less badly. I think these figures say something about future exports since Malaysia re-exports a lot of its imports.
In any case, there are some indications that domestic demand growth finally slowed. I have some expectations that bad news on the external front will affect domestic demand. It has not happened so far but we will see soon how domestic demand grew in the second quarter.
The upside is that government spending could prove to be an important driver of growth in this quarter, mostly because it was an election quarter. For the same reason, investment might grow slower.
There is also base effect to worry since in the 2012 second quarter, growth was 5.6% YoY. While it is a mathematical artefact, it does highlight how hard it is for the GDP to grow faster than it did previously, especially in this kind of environment. This is a case for somebody to develop seasonally adjusted GDP, but that is another story for the wonks.
Ultimately, I expect growth to be about the same as last quarter, if not worse. I will be surprised if growth is anything greater than 4.5% YoY. What about you?
How fast do you think did the Malaysian economy grow in 2Q2013 from a year ago?
It was a good quarter. Growth with solid foundation, domestically and externally. And it is pretty much close to my internal target (although for the wrong reason: I had expected exports to drive the GDP growth, but it was consumption instead.)
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