Malaysia 4Q GDP pegged to hit 5%

It'll be the 6th quarter in a row of good performance.

According to DBS, another good GDP showing is on the cards with the announcement of the 4Q12 GDP figures. The headline number is expected to register 5.0%, making this the sixth consecutive quarters of at least 5% GDP growth. 

While this may appear to be slower than the 5.2% in the previous quarter, it’s due to base effect. Sequentially, that represents a pickup in growth momentum to about 4.5%, from 4.0% in the previous quarter.

Hence, it’s a re-acceleration and not a slowdown. In fact, there is a good chance for an upside surprise in this regards given the recent turnaround in export performance.

Here's more from DBS:

Improvement is clearly visible on the external front. Export and industrial output are in fact rising since Sep12. Such upward trends are likely to continue as global outlook is improving and normalising gradually.

The worst from the European debt crisis is probably behind us. The US recovery, albeit proceeding slowly, remains on track. Growth momentum in Northeast Asia has been fairly healthy in 4Q12.

And the PMIs of key export markets have been improving since then. That should be manifested in the improvement in the export performance, thereby boosting overall GDP growth.

More importantly, domestic demand is still in the driving seat. While moderation can be expected in investment growth and private consumption, the pace of growth will remain healthy.

In fact, domestic growth cannot continue to grow at the previous rapid pace without stoking inflation. Such gradual slowdown in the domestic engines will ensure that the current pace of growth can be sustained into the longer term.

Overall full year GDP growth is likely to register about 5.2%. That’s another good showing from the economy amid the turbulence from Europe last year.

Inflation for Jan12 is also due today and it should mark the bottom of this current declining trend. The headline number is expected to post 1.1%, the lowest since Dec09. But there’s really nothing to cheer about.

Beyond January, headline inflation is expected to trend steadily upwards. Persistently strong domestic demand, coupled with the wage hikes and rapid increase in property prices are stoking inflationary pressure. These factors will likely drive inflation towards the 3% mark in the coming months.

In fact, though market is not expecting any rate hike in the near term, risk of a monetary action by the central bank in the second half of the year is rising if the authority hopes to anchor inflation expectation. Full year inflation is likely to average 2.8%, against the modest 1.7% posted last year.