Malaysia Q2 GDP shrinks 3.9pc on year

From The Business Times:

Malaysia’s economy contracted by 3.9 per cent in the second quarter from a year ago, less than expected, and pace of decline slowed from a 6.2 per cent drop in the first quarter, signalling the start of a slow recovery for this export-dependent country.

Economists in a Reuters poll had forecast gross domestic product would drop by 5.1 per cent due to poor demand for Malaysian exports, which account for 110 per cent of gross domestic product.

Central bank Governor Tan Sri Dr Zeti Akhtar Aziz told a press conference that the budget, due in October, would see a revision to government forecasts that the economy would shrink 4-5 per cent for the full year and that the drop would be less than that.

“We expect gradual recovery, and that this would be sustained,” she said.
Asia’s economies are still feeling the effect of the global economic downturn and Indonesia’s economy grew 4 per cent in the second quarter from a year earlier, while Thailand contracted 4.9 per cent, easing from a 7.1 per cent drop in the first.

Malaysia is Asia’s only exporter of oil and gas and also has large commodity exports and the prices of both have fallen sharply from a year ago.

The government has said that it expects growth to pick up in the second half of 2009 with positive growth in the fourth quarter as a RM67 billion package of government spending and loan guarantees spread over two years kicks in.

The 6% rate of contraction in Q1 overshot due to inventories not being replenished. Q1 had a inventory loss of RM14 billion. Q2 inventories look more normal compared to the last eight quarters at a loss of RM 4 billion.

The good news is we will have inventory replenishment going on and will push up future GDP numbers. It could go to -3% in the following quarters. The bad news is we don't have a lot of upside until about 4Q of 2009. I expect negative growth for Q3 and maybe even growth for Q4.