Malaysia's GDP shrinks in the third quarter

Malaysia's GDP shrinks in the third quarter

KUALA LUMPUR (AFP): Malaysia's economy shrank 8.6 percent in the September quarter, the sharpest contraction in the current downturn and also the steepest among Asian economies except Indonesia, the central bank said on Saturday.

Among the main components of gross domestic product (GDP), a country's total output of goods and services adjusted for foreign income, manufacturing output dived 14.3 percent from a year earlier while construction slumped 28.2 percent.

Agricultural output also declined, falling 8.6 percent, but activity in the services sector grew 1.2 percent and mining output was up 1.7 percent.

Bank Negara Malaysia noted, however, that GDP grew 2.3 percent from the June quarter, up fractionally from 2.2 percent in the previous three months and the strongest quarterly growth rate since the September quarter last year.

"Signs of recovery are emerging with latest indicators pointing towards gradual improvement in economic conditions, particularly since September," a statement said, referring to a series of measures under the central bank's new governor and deputy governor who took control on Sept. 1.

The measures included exchange controls to "insulate" Malaysia from the outside world along with steps to improve liquidity through additional cuts in interest rates and further lowering statutory reserve requirements for banks.

"Latest indicators, including lower inflation, provide encouraging signs that the contraction in the economy has bottomed out and the economy is now entering the recovery phase," the statement said.

"Based on current developments, we can expect to see improvement in the economy from the fourth quarter onwards," it said, adding the government would remain "vigilant" while continuing to carry out structural change in the battered financial sector to help and sustain economic recovery.

Comparative data provided by the central bank showed the 8.6 percent slump in Malaysia's GDP in the September quarter eclipsed the contractions in most of the other leading East Asian economies in the same period.

In Hong Kong, for example, GDP shrank 7.0 percent while South Korea's economy contracted 6.8 percent. Singapore and the Philippines suffered declines of less than one percent. But Malaysia's downturn paled in comparison with Indonesia where economic activity plummeted 17.4 percent.

Bank Negara said the 14.3 percent plunge in manufacturing reflected declines in the production of construction-related materials, especially cement, iron and basic steel, as well as fabricated metal and tobacco.

These declines offset a boost in the transport equipment sector arising from increased car sales in the September quarter and strong growth in the rubber products industry, fueled by demand from the United States and Europe.