Page 8 - Malaysia Builders Directory 2019/2020
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                 Editorial
 THE MALAYSIAN ECONOMY
The Malaysian economy grew by 4.5% in the first quarter of 2019 (4Q 2018: 4.7%), driven mainly by the expansion in domestic demand. On a quarter-on-quarter seasonally-adjusted basis, the economy grew by 1.1% (4Q 2018: 1.3%).
Domestic demand remained the key driver of growth. It expanded by 4.4% in the first quarter (4Q 2018: 5.7%), driven by firm household spending amid weaker capital expenditure. After three consecutive quarters of robust spending, private consumption growth moderated but remained strong at 7.6% (4Q 2018: 8.4%). This mainly reflected the normalisation in spending following the frontloading of purchases during the tax holiday period. Nonetheless, household spending continued to be supported by income and employment growth. Public consumption expanded at a faster pace of 6.3% during the quarter (4Q 2018: 4.0%), attributable to higher growth in spending on supplies and services.
Gross Fixed Capital Formation (GFCF) contracted by 3.5% (4Q 2018: 0.6%), weighed down by weaker private and public sector investment. By type of assets, investment in structures declined by 1.3% (4Q 2018: 1.3%) amid subdued property market activity. Capital expenditure on machinery and equipment registered a larger contraction of 7.4% (4Q 2018: -1.3%), affected mainly by a decline in transport equipment spending. Investment in other types of assets also declined by 2.2% (4Q 2018: 4.5%) due mainly to lower Research and Development (R&D) spending.
Private investment growth slowed to 0.4% (4Q 2018: 5.8%). Investment activity was affected by heightened uncertainty surrounding global trade negotiations and prevailing weaknesses in the broad property segment. Nevertheless, spending on large multi-year projects provided some support to investment growth, particularly in the primary-related manufacturing and utilities services sub-sectors. Public investment declined further by 13.2% (4Q 2018: -5.9%), on account of lower capital spending by the Federal Government and public corporations.
On the supply side, moderation across most sectors was partially offset by a rebound in growth of the agriculture sector.
The services sector growth moderated as the wholesale and retail trade sub-sector registered slower growth following the post-tax holiday normalisation. However, this was partially offset by higher car sales following the release of new models. Growth in the finance and insurance sub-sector was sustained, supported by higher insurance premiums relative to claims which offset slower financing. The utilities sub-sector recorded an improvement given higher demand for electricity, particularly from households amid warmer weather conditions. The information and communication sub-sector remained supported by demand for data communication services.
Growth in the manufacturing sector moderated, mainly driven by the slowdown in the Electronics and Electrical (E&E) and primary-related clusters. The slower growth in the E&E cluster was due to lower global demand for semiconductors. The implementation of stricter vehicle emission standards in the European Union (EU) and expiring tax rebates for cars in China weighed on demand for automotive semiconductors. Growth in the primary-related cluster also moderated as unplanned closure of gas facilities in Sarawak in February affected the production of refined petroleum products, particularly liquefied natural gas. Meanwhile, recovery in the production of palm-oil based products led to an improvement in the consumer-related cluster during the quarter.
The agriculture sector’s growth rebounded due to the strong recovery in oil palm yields from the adverse weather last year. Additionally, natural rubber production improved as higher rubber prices spurred more tapping activities during the quarter.
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