Member Countries’ Recent Economic Report (Malaysia)

Kuala Lumpur, Malaysia | December 06, 2007 by D-8 Secretariat

The Malaysian economy strengthened further in the third quarter of 2007. Sustained strong domestic demand raised real GDP growth to 6.7%. Domestic demand was supported by strong private consumption spending and investment activities. This was reinforced by increased public sector spending. On the supply side, growth was led by the services sector.

The expansion in the services sector accelerated to register a doubledigit growth of 10.5% supported by strong domestic demand, tourism and business activities. Of significance, the finance, insurance, real estate and business services and the wholesale and retail trade, accommodation and restaurant sub-sectors performed well.

All other key sectors recorded positive growth in the third quarter. Growth in the manufacturing sector picked up to expand by 3.4% (2Q: 1.5%) reflecting a gradual recovery in the electronics and electrical (E&E) industry and further expansion in the domestic-oriented industries. Production of export-oriented industries expanded by 1.4% (2Q: -1.6%).

Meanwhile, the domestic-oriented industries continued to expand by 4.6% (2Q: 8.6%) mainly supported by the sustained domestic construction activities and the upturn in sales of new motor vehicles following the release of new models.

The construction sector maintained its growth momentum, expanding by 4.7% in the third quarter of 2007 (2Q: 4.8%), mainly supported by the implementation of various infrastructure projects under the Ninth Malaysia Plan.

Domestic demand strengthened further in the third quarter to expand at an annual growth rate of 12.6% (2Q: 10.8%), on the strength of private sector activities. The increased public sector spending continued to provide support to growth. Private consumption expenditure registered a strong growth of 14% following rising disposable income supported by stable labour market conditions and strong commodity prices.

Private investment indicators, namely loans approved and disbursed to the manufacturing and construction sectors trended firmly upwards suggesting greater momentum in capital spending by the private sector. Meanwhile, higher disbursement for development expenditure by the Federal Government was channelled towards high-multiplier impact economic activities in the form of projects for upgrading and construction of infrastructure to improve the transportation system as well as improving the provisions for the education services and the enhancement of the public utilities.

On the external front, the trade account recorded a surplus of RM28.2 billion in the third quarter (2Q: RM22.6 billion). Gross exports slowed, with a marginal increase of 0.6% (2Q: 1.3%), led mainly by commodity exports, while exports of manufactured goods declined. Agriculture exports continued on an upward trend, driven mainly by palm oil exports due entirely to record high prices of RM2,599 per tonne following a rising global demand amidst lower production in Malaysia and Indonesia as well as lower supply of soybean oil and rapeseed oil in the United States and Europe, respectively.

Growth of gross imports was sustained at 1.7%, reflecting the increase in investment and consumer spending. Imports of capital goods (excluding lumpy items) increased by 7.2% as capacity expansion in the manufacturing sector and upgrading for fuel efficiency led to the strong growth of imports of machinery, generators, turbines and electric motors.

Note: D-8 Organization website is periodically presenting recent economic report of each member countries, by collecting information and data from respective members’ bank central and/or other authoritative institution in charge. The full report can be downloaded in each countries’ profile page from the main navigation menu.

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