16/02/2012 (Daily Times) - Malaysia’s economy slowed to an annual pace of 5.2 percent in the fourth quarter, beating expectations as robust consumer demand and heavy government spending helped shield the country from a worsening global outlook.

The brisk growth in gross domestic product (GDP), announced by the central bank on Wednesday, topped economists’ forecasts of a 5 percent expansion and followed a 5.8 percent annual expansion in the previous three months.

But the bank warned that the economy could slow further in the coming months as the trade-dependent country feels the impact from a global slowdown. A slowdown would give it more leeway to ease its benchmark interest rates from the current 3.0 percent.

“Today’s data confirms what was largely evident, that Malaysia’s domestic sector is firing on all cylinders and has helped offset the weakness in external sector,” said Radhika Rao, an economist at Forecast.

Private consumption rose 7.1 percent from a year ago, while public spending jumped 23.6 percent. The expansion in the last three months of the year took the economy’s full-year growth to 5.1 percent. That is a marked slowdown from 7.2 percent in 2010 as the Southeast Asian country felt impact of weaker activity in advanced economies and uncertainties over the eurozone debt crisis.

“The export engine has started to slow. Though we see quite good signs from the US — a key export market for Malaysia — the euro zone debt uncertainity is the greater concern,” said Lee Heng Guie, head of economics at CIMB bank. “Bank Negara will keep the option of easing open. To assess what happens in the March meeting, we need to see how the January data looks like.”

Malaysia’s official growth target for 2011 was 5.0-5.5 percent, with 5-6 percent seen for 2012, but some economists have cut their 2012 forecasts in view of weakness overseas. Eonomists surveyed by Reuters expected growth in 2012 to slow further to 4.3 percent.

Malaysia’s exports have held up relatively well in recent months compared to its regional peers, partly thanks to high prices for its commodity products such as palm oil, but economists expect a sharper downturn in trade next year.

The country’s exports grew 6.1 percent in December from the previous year. That compared to 2.19 percent growth in neighboring Indonesia’s exports, while Philippine exports fell by a fifth to a two-year low in the same month. In addition to lower commodities prices in the fourth quarter, the key electronics sector has continued to slump on sluggish global demand.

Still, Malaysia’s economy has been shielded to some extent by strong consumer demand and generous fiscal spending by the government, which is facing a fiercely contested national election either this year or in early 2013. Inflation in December eased to an annual pace of 3.0 percent from 3.3 percent in November and is expected to fall further, which could give the central bank leeway to cut interest rates at its next meeting in March. reuters