Malaysia’s economic growth slowed to 4.7 percent in the first quarter, the government said Wednesday, due to weakening exports sparked by a stuttering global economy and debt woes in Europe.
The slower expansion in the export-dependent Southeast Asian country came after the economy grew at a 5.2 percent clip in the fourth quarter of 2011.
“Domestic demand remained firm, supported by both private and public sector economic activity, while exports moderated amid weaker external demand,” Bank Negara, the central bank, said in a statement.
The bank has projected growth to expand four to five percent this year, slower than the 5.1 percent seen in 2011.
Economists said the slower growth indicated that the economy was “moderating at a better pace than expected” in light of the eurozone crisis.
“One of the headwinds hitting not just Malaysia but also regional economies is the very weak growth in Europe with some countries mired in recession,” said Yeah Kim Leng, chief economist with financial research firm RAM Holdings.
“The concern here is of course the slowdown is affecting Asian exports including Malaysia, given its sizeable export sector.”
But Yeah said he expected the Malaysian economy to grow at 4.6 percent in 2012, backed by strong domestic demand.
In early May, the central bank kept its key interest rate at 3.0 percent for the sixth time in a row to drive domestic demand.
Inflation was 2.3 percent in the first quarter and is expected to moderate to 2.5-3.0 percent for 2012 amid lower global commodity prices and modest growth in domestic demand.
The central bank said that while the challenging external environment would remain a risk to Malaysia’s growth prospects, “domestic demand is expected to remain resilient”.
Prime minister Najib Razak, who must call fresh elections by April 2013 and faces a strengthening opposition, has set a goal of Malaysia becoming a “high-income developed nation” by 2020.
He said last year that annual growth of at least 6.0 percent was needed to achieve that.
Under the plan, Najib aims to double per capita income to 48,000 ringgit ($16,000) by 2020.
The government has promised major infrastructure projects and financial market liberalisation to attract foreign investment and boost growth, but critics say the results have been limited.