The expansion in GDP beat economists' median expectations of 4.8%. GDP growth in the second quarter was revised upwards to 5.6% from 5.4%.
Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz said at a briefing to announce the GDP data that growth in the quarter was supported by domestic demand, especially in the favourable performance of private and public sector consumption and investment activities.
She noted that growth was affected by slower external demand resulting in further decline in net real exports of goods and services.
“The world economic environment remained challenging in the third quarter.
“Growth in the advanced economies was uneven, with the US economy experiencing an improvement while several other major advanced economies continued to experience weak growth, constrained by fiscal adjustments, sluggish labour markets and impaired financial intermediation,” Zeti said.
Moving forward, Zeti said GDP growth trend in the fourth quarter was “likely to continue very much like the third quarter” but added that there were some uncertainties seen in the export sector.
“The export sector reflects the (economic) developments in the global environment. It will continue to remain weak because of the economic developments taking place in the developed world. But domestic demand is expected to continue being strong.
“And as such, the outcome (of this) is that we will, of course, be affected by external developments as we are not insulated but the anchor to our growth is from domestic demand and we expect this to continue to be strong,” she said.
On Bank Negara's growth estimates for the entire 2012, Zeti said GDP growth for the full year “would be at least 5% or better.”
“This (assumption) is given that (GDP growth in) the first three quarters have been better than expected. In the first half of the year, the exports sector was better than expected despite the challenging external environment.
“But as we entered the third quarter, we see exports became negative and it remains uncertain as how the exports sector will perform in the fourth quarter,” she said.
Bank Negara said that during the third quarter, domestic demand expanded by 11.4% (versus 14% in the second quarter) while gross fixed capital formation registered a robust performance of 22.7% from 26.1% in the second quarter (Q2), underpinned by capital spending by both the private and public sectors.
“Private sector investment was driven by capital spending in the services sector, particularly the transportation, real estate and utilities sub-sectors and the ongoing implementation of projects in the oil and gas sector,” Zeti said.
“For public investment, the capital spending by public enterprises was mainly channelled into the transportation, oil and gas and utilities sectors while the Federal Government's development expenditure was mainly channelled into the transportation, education and public utilities sectors,” she added.
Bank Negara noted that growth across most economic sectors had moderated in the third quarter.
The services sector growing by 7% from 6.6% in the second quarter, manufacturing slowed slightly with a 3.3% growth from 5.6% in the second quarter due to a moderation in export and domestic-oriented industries and the construction sector grew by 18.3% from 22.2% in the second quarter, driven by the civil engineering sub-sector such as the mass rapid transit mega project and the construction of the second Penang bridge.
Bank Negara said the agriculture sector recorded growth of 0.5% from minus 4.7% in the second quarter due to a recovery in crude palm oil production, while the mining sector contracted 1.2% from a 2.3% growth in the second quarter because of declines in natural gas production due to planned shutdown in facilities.
Economists told StarBizWeek that the third-quarter economic growth was commendable and they were unanimous that growth will most likely exceed 5% for the whole of this year.
“Malaysia's GDP growth of 5.2%, which is marginally slower than 5.6% in the previous quarter, is a gravity-defying performance. This is testament to continued consumer spending and economic transformation programme projects that have offset some external headwinds,” RAM Holdings group chief economist Dr Yeah Kim Leng said.
“My estimate for GDP growth for the third quarter was 4.5% earlier. For the full year, it is likely to be at the higher end of the range of forecast, likely above 5%. Of course, external risks still remain, given the contraction in eurozone and fiscall cliff situation in the US economy.”
Alliance Research chief economist Manokaran Mottain said that going forward, he was confident GDP growth would still be healthy at around 5% in 2013.
“This is in line with the Government's continued spending to develop infrastructure and its recently announced bonus to civil servants and cash hand-outs to targeted groups.
“The economy (in the third quarter) is still driven by domestic demand, led by private consumption and investment activities, reflecting the Government's drive to stimulate income growth, improve and develop infrastructure as well as ensuring a steady flow of foreign capital,” Manokaran said.
By DANIEL KHOO firstname.lastname@example.org