Economic news – 3Q10 GDP: Slowing down but unlikely to stall (CIMB)

The Malaysian economy grew at a slower pace of 5.3% yoy in 3Q (9.5% in 1H10), weighed down by slower export growth and domestic demand. This is lower than our estimate (5.7%) as well as market consensus (5.7%). We are not overly concern with the deceleration pace to a more normal and sustainable as it is just part of the inevitable adjustment from an expansion pace. Much of the domestic demand strength came from private sector as public sector’s stimulus spending is tapering off. Consumer spending remains resilient at 7.1% and total investment gained 9.8%. The bottom line remains that growth outlook for the Malaysian economy still positive, though at a more moderate pace going forward. We maintain our real GDP growth estimates of 7.0% this year and 5.5% for 2011. We do not expect monetary tightening until 2H11 while BNM will stay on guard against volatile capital flows.