MALAYSIA has managed to improve its gross domestic product (GDP) performance for the second quarter this year to 4.3 per cent from 4.1 per cent in the first quarter, on the back of robust domestic demand and despite a weak external sector.
The external sector saw growth in several neighbouring countries, notably Indonesia and Thailand, moderating.
These two economies saw slower second quarter GDP growth rates of 5.8 per cent (from six per cent) and 2.8 per cent (from 5.4 per cent), respectively.
Even China registered slower growth of 7.5 per cent (from 7.7 per cent in the previous quarter), maintaining its downward trend. The country used to post nine to 10 per cent growth. It posted 9.7 per cent growth for the first quarter of 2011.
The slow growth was partly due to weak expansion in factory output and fixed-asset investments.
However, Malaysia's improvement in the second quarter was in line with the performance of advanced economies such as Singapore and South Korea, which have increased to 3.8 per cent (from 0.2 per cent) and 2.3 per cent (from 1.5 per cent), respectively.
Growth continued to be supported by robust domestic demand (which grew 7.3 per cent), driven by consumption and private investment.
Overall consumption rose eight per cent, not only from increased public consumption, but also from healthy private consumption underpinned by a stable labour market and sustained wage growth in the domestic-oriented sectors.
Private investment rose at a faster pace, at 12.7 per cent, helped by investments in consumer-related services sub-sectors, the ongoing implementation of infrastructure projects and capacity expansion in the oil and gas sector.
The share of private investment to total investment also improved from 62.3 per cent to 68.8 per cent. The stronger growth in private investment suggests domestic resiliency in light of external uncertainties.
On the supply side, manufacturing and mining rebounded from last quarter as it grew 3.3 and 4.1 per cent respectively.
In the first quarter, manufacturing recorded only 0.3 per cent growth, while mining declined 1.9 per cent. The rebound in manufacturing was credited to domestic-oriented sub-sectors, while for mining, improvement was due to higher production of natural gas, crude oil and condensate.
Services remained the leading GDP contributor and its 4.8 per cent growth was supported by communication, real estate and business services and wholesale and retail trade.
Construction continued its strong momentum since first quarter 2012, registering a 9.9 per cent increase.
The main drivers were residential sub-sectors, which rose 21.4 per cent, and civil engineering, as the Economic Transformation Programme projects, such as the Mass Rapid Transit, continue to have a positive impact.
The agriculture sector grew only 0.4 per cent on the back of a reduction in natural rubber output and slower growth in the production of crude palm oil. The depressed commodity prices might also have had a negative impact on the sector.
The International Monetary Fund had recently revised its world GDP forecast for 2013 to 3.1 per cent from 3.3 per cent previously, citing appreciably weaker domestic demand and slower growth in several key emerging market economies, as well as a more protracted recession in the euro area.
While the higher volatility in the global financial market stemmed from possible tapering of the United States quantitative easing programme, the domestic financial system remained resilient.
Recognising the lingering uncertainty in the global economy, Malaysia's GDP growth forecast for this year has been revised to between 4.5 and 5.0 per cent.
However, Malaysia's domestic fundamentals remain strong and GDP growth is expected to be anchored by domestic demand and some improvement in the external sector in the second half.
Nevertheless, the government will be monitoring the situation closely, especially the external sector.