Malaysia’s economy faces subdued growth due to tight fiscal policy

Investing.com — Malaysia’s economy experienced softer growth in the third quarter, and it is projected that the upcoming year will see fairly subdued growth due to the impact of a tight fiscal policy on demand.

As per the preliminary estimate released today, the GDP growth decreased to 4.8% year-on-year in the fourth quarter, down from 5.3% in the previous quarter. The consensus had predicted a growth of 5.2%.

“We think GDP growth should ease to 4.8% this year, from 5.1% last year. But with inflation set to rise on the back of subsidy cuts, we think the central bank will keep interest rates unchanged for the foreseeable future (including at its scheduled meeting next week),” Capital Economics analysts said in a note.

The preliminary estimate is based on data from the first two months of the quarter. Although these figures could still undergo significant revisions, the advanced estimate has historically been a reliable indicator of the final number.

A detailed breakdown of the expenditure side will not be available for a few more weeks. However, the production breakdown revealed that the economy was primarily propelled by strong growth in the services sector.

On the other hand, growth in the manufacturing and construction sectors slowed, while agricultural output decreased.

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