Impressive growth in Q4 amidst challenges - Analysts

Amidst the challenging global and domestic economic environment last year, analysts feel that the 4.5 per cent economic growth in the final quarter of 2016 was impressive.

"The expansion was faster than what we had expected for Q4, as we were expecting a 4.4 per cent growth from 4.3 per cent in the third quarter," said Affin-Hwang Investment Bank Vice-President/Head of Retail Research Datuk Dr Nazri Khan Adam Khan.

During the three-month period, he said the global economy scenario was volatile following uncertainty over what would have been Donald Trump's policies after his US presidential election victory and the anticipation of further interest rate hikes by the Federal Reserve.

This has caused the stock markets to stumble in the red with currencies tumbling in most emerging economies, including the ringgit.

"However, we did see a recovery in our exports and consumer spending (compared with the third quarter of last year), which means despite all the challenges in the global economy, Malaysia seems to maintain its competitiveness in exports," he told Bernama.

Nazri was commenting on yesterday's release of the country's gross domestic product (GDP) figures by Bank Negara Malaysia, which showed expansion in private sector expenditure, underpinning the 4.5 per cent growth in Q4, leading to a full year growth of 4.2 per cent (FY15:5.0 per cent).

Meanwhile, IQI Group Holdings Chief Economist/Investment Strategist Shan Saeed said Malaysia's ability to chalk up a commendable 4.5 per cent in Q4 proved that the government had done a good job in managing the economy despite the tough conditions throughout the year.

"Raising productivity, accelerating economic reforms and continued public and private investments helped the economy to cushion the fallout from the near collapse in crude oil prices, the weakening ringgit, and flagging regional and global sentiment.

"I think Malaysia can stand the volatility of the global financial market because the government is the total controller of the economy, plus the balance sheets (of the government)," he said.

As long as the GDP is higher than the discount rate, inflation rate and budget deficit rate, Shan said the economy would remain positive and Malaysia's macro fundamental could still sustain in the longer term.

"For example, if you look at Europe, they are advocating political economy. So, whenever politics is involved, that is not creating any confidence, the economy will remain shaky," he added.

Meanwhile, Professor of Economics at Sunway University's Business School Dr Yeah Kim Leng said the slowing growth trajectory from 6.0 per cent in 2014 to 5.0 per cent in 2015 remained a concern.

He proposes the need to accelerate economic reforms and implement policy measures to boost productivity, industrial upgrading and business climate.

"For this year, we expect the moderating domestic growth momentum stemming from high household debts, shrinking fiscal space and rising unemployment to be offset by stronger commodity prices and export demand.

"Coupled with a slight increase in government spending and continued large scale infrastructure investment, the economy is expected to edge higher at 4.4 per cent this year," he pointed out.

As for the ringgit, it is expected to trade in a volatility mode, especially against the US dollar, given the expected interest rate hikes amid the strengthening US economic growth and inflation, Yeah elaborated.

"Despite being undervalued at the current rate, any further ringgit weakening will likely be short term as the currency's strength is supported by the expected improvement in domestic output growth, uptrend in exports and adequate foreign reserves.

Other supporting factors include ample domestic liquidity and a robust banking and capital market system, he added.

-- Bernama