Malaysia first-quarter GDP growth faster than forecast, but central bank warns of risks

FILE PHOTO: A farmer works in a vegetable field at his farm in Klang, outside Kuala Lumpur - REUTERS 

KUALA LUMPUR (Reuters): Malaysia’s economy grew faster than expected in the first quarter supported by a recovery in the agriculture sector, but the central bank warned of downside risks to full-year growth.

Bank Negara Malaysia said the economy grew 4.5% in the January-March quarter from a year earlier, above the 4.3% expansion forecast in a Reuters poll.

The Southeast Asian economy had grown a faster 4.7% in the October-December period last year, accelerating after four straight quarters of slowing growth.

In the first quarter, the agriculture sector grew 5.6%, far stronger than the 0.1% growth recorded in the previous quarter.

A 7.6% increase in private consumption also boosted economic growth in the quarter, the central bank said, though it was a moderation from the fourth-quarter’s 8% growth.BNM cut its policy rate last week for the first time since 2016 to support the economy on heightening concerns about global growth.

The country’s exports contracted in February and March and will likely face sustained pressure as the United States and China pursue another round of tariff increases. Malaysia is one of the most vulnerable countries to the US-China trade war, being a large exporter of intermediary goods to China.

“Risks to the outlook remain tilted to the downside, mainly emanating from external factors,” the central bank said, maintaining its full-year growth target at 4.3-4.8%.

Bank Negara also introduced measures to improve liquidity in the repo and currency markets, and more flexibility in currency hedging.

Malaysia’s current account surplus widened to 16.4 billion ringgit ($ 3.93 billion) in the first quarter, from 10.8 billion ringgit in the fourth quarter.