Malaysia Q2 GDP seen down 5.1pc on year

From the Business Times:

Malaysia’s economic recovery looks set to lag that of its peers, with economists saying gross domestic product likely shrank by 5.1 per cent in the second quarter from a year ago, a Reuters poll showed.

In addition to a steep fall in exports, Malaysia has seen capital spending stagnating as well as an inventory destocking to the tune of US$15 billion in the first quarter, retarding a recovery, according to a recent report from BNP Paribas.

Malaysia posted its first drop in output in seven and a half years when first quarter GDP fell 6.2 per cent from a year ago, and the poll of 12 economists showed that Malaysia’s central bank would hold rates at 2 per cent until there was firm evidence of an economic recovery.

The central bank’s next policy meeting is on today, with the GDP data to be released on tomorrow.
Malaysia’s central bank and the government are expecting growth to return only in the fourth quarter, whereas in Indonesia growth has already picked up and is expected to return in Thailand when it reports second quarter data next week.

Japan, Hong Kong and Singapore also pulled out of recession in the second quarter, but the recovery is seen as fragile as long as consumer demand in Asia’s key Western markets remains weak.

“While central bankers are often prompted to ’take away the punch bowl just as the party gets going’, the degree of uncertainty and prolonged nature of the recovery could prompt Bank Negara Malaysia to leave the rate (steady) until end-2010,” said Standard Chartered Economist Alvin Liew said.

Economists say that a fiscal stimulus package of RM17 billion this year has yet to have a major impact and the economy has also sunk into deflation with consumer prices falling 2.4 per cent year-on-year in July.

The central bank has cut rates by a cumulative 150 basis points in its recent easing cycle in a bid to ease the domestic fallout from the global financial crisis.

Malaysia is Asia’s third-most trade dependent country. June exports fell by 22.6 per cent on an annual basis but rose 5.1 per cent increase from May on a seasonally unadjusted basis.

I think the -5.1pc is a reasonable number. We are still seeing massive drop in exports and last year's Q2 gdp growth was incredibly high at 6.6%. We still have a ways to fall numerically speaking.

Malaysia GDP 2007-2009 from The Department of Statistics