KUALA LUMPUR, 13th May, 2016 (WAM) — The 4.2 per cent annual Gross Domestic Product (GDP) growth recorded for the first quarter (1Q16) as announced by Bank Negara Malaysia has exceeded the forecast of economists.

It came in higher than the consensus estimate of 4.0 per cent, said Bank Islam Malaysia Bhd Chief Economist Dr Mohd Afzanizam Abdul Rashid.

He commented that the domestic engine, particularly consumer spending, really surprised on the upside considering the 5.3 per cent growth in private consumption after expanding 4.9 per cent in the preceding quarter.

“We understand that sentiment as reflected by the Consumer Sentiment Index is generally weak, although there was a slight uptick during the first quarter. (72.9 points in 1Q16 against 63.8 points in 4Q15).

“Perhaps, the reduction in the contribution of members to the Employees Provident Fund from March, as well as the decline in petrol prices during the 1Q16, could have instilled some positivity in terms of spending decision among consumers,” he told Bernama.

The pump price for RON95 was at RM1.60 per litre in March against RM1.95 in December last year.

“However, the rise in the unemployment rate to 3.5 per cent in March after sustaining at 3.4 per cent in the past three months, suggests that such optimism is relatively fragile at the current juncture.

“On private investment, the trend is very much in tandem with weak sentiment, when it grew by 2.2 per cent from 4.9 per cent in the preceding quarter,” said Afzanizam.

“However, with more infrastructure projects being awarded, it should give some comfort to businesses, especially the construction sector and hence, improve prospects for better growth in private investment.

“While, prospects for the economy continues to be challenging, we believe the government, especially Bank Negara Malaysia (BNM), have the necessary resources to stabilise it.

“Such a policy buffer is important for confidence building and this should be positive for markets and Malaysians in general,” he added.

WAM/tfaham