Malaysia’s second quarter GDP growth expected to ease to 5.2%

Malaysia’s economic growth pace likely slowed again in the second quarter of 2018, a Reuters poll showed.

The median of forecasts from 14 economists is for annual growth of 5.2% in April-June. That would be a dip from January-March’s 5.4% and make the latest quarter – during which Malaysia surprisingly got a new government – the third in a row of slowing growth.

Forecasts for second quarter growth ranged from 4.7-5.6%.

“Growth likely eased in Q2 and may continue to moderate, with growth drivers shifting more to private consumption than investment,” Standard Chartered said in a research note.

The bank said growth may have been weighed down by a 6.4% drop in palm oil production from a year earlier and by Prime Minister Tun Dr Mahathir Mohamad’s push to review major infrastructure projects which has spooked investors.

Since his coalition gained power in a shock May general election, Mahathir has scrapped a broad-based consumption tax and announced plans to potentially scrap multi-billion dollar rail projects with China and Singapore.

Mahathir, who at 93 is on his second stint as premier, has said that mismanagement by the past administration has caused national debt to balloon to RM1 trillion.

Ratings firm Moody’s said demand for tech exports has helped Malaysia’s manufacturing and exports in the second quarter, along with higher private spending following a tax holiday that started in early June when the government zero-rated its goods and services tax.

“The brakes will be applied a little to the upbeat growth engine in the second half as the newly elected government has ended some infrastructure projects,” Moody’s said in a research note on Aug 7.

Malaysia’s central bank left its key interest rate unchanged at 3.25% in July, at its first policy meeting under new governor Datuk Nor Shamsiah Mohd Yunus.

The central bank raised its rate by 25 basis points in January, its first hike since July 2014, and the first change since July 2016 when it slashed the rate by 25 basis points.