Malaysia's growth pace moderated in the opening months of 2013 after a strong end to 2012. The sputtering export engine cut growth; exports contracted year over year for a third straight quarter, reflecting weak global demand for the country's key electronics goods, according to a commentary Moody's Analytics.
Rising imports indicate net exports subtracted from growth. Moody's expects this week's GDP report to show the economy expanded 5.7% in the first quarter, slower than the fourth quarter's 6.4%.
"The moderation doesn't worry us because the domestic economy remains strong," says Moody's. Moody's explains that rising capital imports and the recent victory by Malaysia's ruling coalition ensure the continuation of an infrastructure investment drive, which will help the economy grow strongly in coming quarters.
Job growth, low unemployment, and minimum wage increases support consumer confidence and spending. The external sector is expected to slowly recover in line with the global economy, contributing to growth in the second half of the year.
Solid growth and steady inflation will allow the central bank to keep the policy rate on hold at 3% for the rest of 2013 and into 2014, in contrast to the easing monetary stance witnessed across much of Asia, says Moody's.