Malaysia's economy grows 5.7pc in Q2

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Rupa Damodaran
THE Malaysian economy expanded 5.7 per cent in the second quarter of this year, beating market expectations that gross domestic product (GDP) growth would come in at 5.5 per cent year-on-year.
Bank Negara Malaysia Governor Tan Sri Dr Zeti Akhtar Aziz said the economy was on track to achieve the targeted six per cent annual growth for this year
First quarter growth was also revised upwards to 5.5 per cent from 5.3 per cent earlier.
Zeti said the domestic economy has done extremely well as consumption remained robust, investment activities and inflow of foreign direct investment stayed strong.
"This was despite a significant weakening in the electrical and electronics sector. The export was negative but we registered a positive growth in export performance," she said when releasing the details of the second quarter GDP in Kuala Lumpur yesterday.
Domestic demand expanded strongly in the second quarter to 10.8 per cent from 8.7 per cent in the first quarter, supported by private equity activities and increase in public investment spending.
The construction sector strengthened during the quarter to expand by 4.8 per cent, the strongest growth since 2001.
The manufacturing sector registered a 1.5 per cent growth during the second quarter (from a revised two per cent in the first quarter) while the services sector posted a 9.2 per cent growth (9.7 per cent in the first quarter). The agriculture sector contracted by 0.9 per cent mostly due to a downtrend in oil palm production since the last quarter.
Zeti expects growth to continue in the second half, given the rise in tourist arrivals, reopening of the Kikeh oilfield after maintenance works and the coming onstream of a new liquified natural gas plant.
She said the services sector will continue recording strong growth while the agriculture sector is expected to perform better.
Several more implementation of projects under the Ninth Malaysia Plan will reinforce the domestic economy
On the impact of the external sector following the subprime loan woes in the US, Zeti said it would depend on how the US economy performs.
"At the moment there is no significant spillover effect from US demand.
"We are in a position to absorb the volatility without having an impact on our financial system and our economy because of the more diversified nature of our financial system, strong reserves, strength of our financial institutions and their capacity to absorb and contribute to the economy. What we have worked hard to achieve is now providing the pay-off - a higher resilience and ability to support the economy," Zeti said.
She also said that interest rate was near historical lows and remained supportive of the economy.
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