Malaysia’s Q3 GDP beats forecast to grow at fastest pace in over 3 years

KUALA LUMPUR: Malaysia´s economy expanded in the third quarter at its fastest pace in more than three years, central bank data released on Friday showed, driven by domestic demand and strong exports.
Southeast Asia´s third-largest economy has recovered this year after a rocky 2016, when growth slumped to its slowest pace since the global financial crisis in 2009. The turnaround may encourage Prime Minister Najib Razak to call a general election before the August 2018 deadline.
The ringgit climbed to 4.158 versus the dollar on Friday after the GDP data was issued, its highest in a year.
It has been hitting fresh year-highs since Wednesday.
Malaysia´s economy grew 6.2 percent in the third quarter from a year earlier, topping a Reuters poll forecast of 5.8 percent and recording the fastest growth since the second quarter of 2014.
Central Bank governor Muhammad Ibrahim said the economy was on track to register growth of 5.2 to 5.7 percent this year and may even exceed that estimate.
"Exports and the numbers look good so it would be a pleasant surprise (if GDP exceeds 5.7 percent).
But watch for the external environment.
That will influence our growth, not only for Malaysia but also the world," Muhammad said at a news conference.
The government had earlier revised its 2017 full-year projection up from 4.3-4.8 percent.
Domestic demand and exports will likely remain strong enough to prop up the economy going into the next quarter, with risks narrowing as the global economy stabilises, Muhammad said.
Malaysia´s current account surplus grew to 12.5 billion ringgit, up from 9.6 billion ringgit in April-June.
The central bank said the ringgit currency has strengthened, but risks remained.
"Ringgit levels are a reflection of our economic strength, and there is more liquidity in the market now and it is not influenced by speculative flows anymore," Muhammad said.
"It is more reflective of financial flows in the domestic market." In November last year, the central bank stepped in to discourage ringgit trade in the non-deliverable forwards (NDF) market, and later introduced measures to boost onshore ringgit trade.
The ringgit has so far gained 7.2 percent on the dollar this year after hitting a near 19-year low of 4.4980 on Jan. 4.
The central bank held left its benchmark rate
unchanged last week but raised the possibility it
may review the rate to suit improving economic conditions.
Muhammad said the bank will look at a review based on incoming data. If there was to be any change it would not be so much a tightening as a "normalisation" of the rate.
BNM expects inflation to be in a higher range of 3 to 4 percent for 2017, depending on oil prices.
The projected spike in inflation would be a worry for Prime Minister Najib, who may face a backlash from voters angered by rising living costs and the introduction of a broad-based consumption tax in 2015.
Najib faces his toughest election yet as he looks
to counter bad publicity from a corruption scandal involving state-owned fund 1Malaysia Development Berhad (1MDB) and a growing challenge from Mahathir Mohamad, his former mentor turned rival.
Last month, the prime minister unveiled his last
annual budget before the polls, promising sweeteners that would cut personal
income tax for lower-
income citizens, pay more
to pensioners and spend billions on schools,
hospitals and rural infrastructure.
The central bank said a "holistic review" of the foreign investment incentive framework was needed, but did not elaborate.