KUALA LUMPUR: Malaysias gross domestic product (GDP) grew 4.2 per cent in the first quarter of 2016, its slowest growth since the third quarter of 2009, announced Bank Negara Malaysia Governor Muhammad Ibrahim on Friday (May 13).
The economy was dragged down by external shocks and cautious private spending, he added. However, this was still within its 4 to 4.5 per cent target growth, which is supported by measures to boost disposable income and improve private spending.
The new central bank governor Muhammad Ibrahim, who took over from former governor Dr Zeti Aktar Aziz earlier this month, said that the moderate growth was temporary, and was expected to improve in the second half of 2016 on the back of higher manufacturing and improved commodities production.
Higher wages for civil servants and an increased new minimum wage are also expected to aid the improvement, authorities added.
According to the central bank governor, business sentiment has not been affected by issues surrounding state fund 1Malaysia Development Berhad (1MDB). This is despite 1MDBs recent debt defaults which have impacted the ringgit, making it Asias worst performing currency during the first quarter.
Muhammad also downplayed risks to the countrys sovereign rating.
There were a lot of factors that influenced the cautious spending, and it had nothing to do with the issues related to 1MDB, he said. (Its because of the) stability of our income and security of employment.
The central bank added that the current account surplus narrowed to 5 billion ringgit (US$1.24 billion) in the first three months of this year, lower than the 11.4 billion ringgit in the previous quarter.
Reserves are also strong at US$97 billion, enough to cover 1.2 times of external short term debts, he said.
CLOSING THE 1MDB SAGA
Under Dr Zeti, the central bank had slapped 1MDB with a fine, which Muhammad said marks the end of its investigation into the state fund.
1MDB has until May 30 to pay the undisclosed fine set by Bank Negara. The state fund is still locked in a dispute with Abu Dhabis wealth fund International Petroleum Investment Company over billions of dollars that have gone astray.
Dr Zeti said he wants to leave me a clean slate, said Muhammad. We have closed the investigation on 1MDB, and the payment of the compound will mark the conclusion of our investigation.
When asked if Bank Negara will be requesting the missing money back from 1MDB, Muhammad said: We were told that 1MDB needs time to restructure its debts and its a complex process. We will give them reasonable time to settle that.