Kuala Lumpur - Amid a sliding currency and a flirtation with default by its state investment company, Malaysia got some good news yesterday its economy unexpectedly accelerated last quarter.
The bad news: the pick-up probably won't last.
Gross domestic product rose 5.8% in the three months through December from a year earlier, after climbing 5.6% in the third quarter, Bank Negara Malaysia said.
That beat all estimates in a Bloomberg News survey of 22 economists where the median was for a 5% increase. The economy grew 6% in 2014.
Private consumption and investment have supported expansion in the Southeast Asian nation, even as the commodity producer's exports slow. Crude prices at half the level of a year ago are curbing revenue and forcing the government to cut spending, with Prime Minister Najib Razak saying in January growth might be weaker than initially estimated in 2015.
"Despite the upside surprise, we remain cautious on the 2015 outlook, and a slowdown in economic activity remains our base case," said Lim Su Sian, an economist at HSBC Holdings Plc in Singapore. "The slump in oil prices is also likely to have a more pronounced impact on exports going forward."
"The economy is projected to expand 4.5-to 5.5% this year,'' Najib said Jan 20, compared with an earlier forecast of as much as 6% growth.
"The Malaysian economy is expected to remain on a steady growth path," the central bank said yesterday. "The gradual recovery in global growth will lend support to manufactured export performance, although overall export growth would likely remain modest amid lower commodity prices."
Export growth slowed to 1.5% in the fourth quarter from a year earlier, after increasing 2.8% in the previous three months. Manufacturing growth eased to 5.2%, while investment climbed 4.3%.
"Malaysia won't repeat the performance last year as exports will struggle because of falling oil prices," said Chua Hak Bin, an economist at Bank of America Corp's Merrill Lynch in Singapore. "Consumer spending will buckle because of the goods and services hike from April, and also stricter access to credit."
State investment company 1Malaysia Development Bhd hadn't been able to repay a two billion ringgit ($552 million) loan owed to Malayan Banking Bhd and four other lenders since November, the Edge newspaper reported Jan 6.
"It was given a third 30-day extension last month and the debt will come due at the end of February,'' people familiar with the matter said Jan 27.
"In the near term, Malaysia will be held hostage by oil prices as well as clarity on 1MDB's debt settlement," Weiwen Ng and Glenn Maguire, Singapore-based economists at Australia & New Zealand Banking Group Ltd, wrote in a note. "Bank Negara Malaysia will continue to be firmly in 'wait-and-see' mode."
Inflation this year will be between 2.5 and 3.5%, central bank governor Zeti Akhtar Aziz said last month. The government in October projected consumer price gains would average 4 to 5% this year.
Price pressures may be limited as the government on Wednesday announced lower electricity tariffs from March for businesses and some consumers.
Malaysia's current-account surplus narrowed to 6.1 billion ringgit in the fourth quarter from 7.6 billion ringgit in the preceding three months. That compared with the median estimate for a surplus of 9.8 billion ringgit in a Bloomberg survey of nine analysts.