Published: Wednesday May 15, 2013 MYT 6:05:00 PM
Updated: Thursday May 16, 2013 MYT 12:40:46 PM
Malaysia's economy grew 4.1% in Q1, manufacturing slows (Update)
KUALA LUMPUR: Malaysia's economy grew at 4.1% in the first quarter ended March 31, 2013, as manufacturing recorded slower growth due to the weak external conditions, but domestic demand will continue to underpin further growth.
Bank Negara Malaysia said on Wednesday amid this weaker external environment, the Malaysian economy expanded at a slower pace compared with the 6.5% in the fourth quarter ended Dec 31, 2012 and the 5.1% a year ago in Q1, 2012.
The central bank said the agriculture sector grew 6% in Q1, 2013, construction 14.7%, services 5.9%, manufacturing 0.3% and mining shrank 1.9%.
Despite the weaker activity, the economy was supported by stronger domestic demand that expanded by 8.2% during the quarter (4Q 2012: 7.8%).
"For the Malaysian economy, domestic demand is expected to remain as the key driver of growth, driven by sustained private sector expansion and supported by the public sector.
"While global developments will continue to present downside risks, intra-regional trade is expected to reinforce the growth performance.
On the weaker trade-related activity, it said this was offset partly by the services sector, which continued to expand. Underpinning this growth was the sub-sectors catering to the domestic market, it said.
Growth in the agriculture sector was sustained due to higher production of palm oil, while the mining sector declined due to lower production of crude oil.
"In the construction sector, growth remained firm, led mainly by progress in the civil engineering sub-sector," it said.
As for the global economy, BNM said it grew at a modest pace in Q1, 2013. Growth in the US remained slow, while the economic performance in most European economies remained weak amidst the ongoing policy challenges and domestic structural concerns.
However, for Asia, economic activity continued to expand, although at a slower pace, as domestic demand continued to outweigh weakness in external demand.
BNM said on the supply side, while the domestic-oriented industries continued to register sustained growth, activity in the major economic sectors was weighed down by the weak external conditions.
It expected domestic demand to remain robust amid continued challenges in the external environment.
"Going forward, the global economy is expected to continue to expand, but downside risks to growth will remain. In the advanced economies, economic recovery continues to be vulnerable to policy uncertainties and the risk of contagion.
"The divergent policies across regions are also resulting in spillover effects on global financial conditions.
"Nevertheless, in Asia, growth will continue to be sustained by domestic demand, underpinned by income growth and healthy labour market conditions, and supported by continued policy flexibility," BNM said.
Reuters reported Wednesday the euro zone's economy contracted for the sixth straight quarter at the start of this year, marking its longest recession on records dating back to 1995.
Falling output across the bloc, from France to Finland, meant the 17-nation economy shrunk 0.2% in the January to March period, the EU's statistics office Eurostat said.