Second quarter GDP growth expected to ease to 5.2%

PETALING JAYA: ’s gross domestic product (GDP) growth is expected to ease to 5.2% year on year in the second quarter (Q2) from 5.4% in the first quarter, said Standard Chartered Global Research.

“The zero-rating of the goods and services tax (GST) from June 1, with the sales and services tax (SST) only coming into effect from Sept 1, resulted in a tax holiday; this may have boosted private spending in June,” it said in its report today.

In addition, election campaign spending from late April till early May also likely contributed to Q2 GDP growth.

Meanwhile, palm may have weighed on headline GDP growth, as production fell 6.4% year on year, likely due to lower crude palm oil prices after five consecutive quarters of a year-on-year increase.

A review of mega infrastructure projects post-general election may have also weighed on investments and, therefore, GDP growth.

“While we maintain our 5.3% growth forecast for the year, growth may be more reliant on private consumption than before, supported by the tax holiday in Q2 and Q3 and a healthy labour market.

“Nevertheless, household consumption is already running hot at 7% year on year and may be weighed down by slowing property prices and still-high household leverage,” said Standard Chartered Global Research.

The research unit cut its investment and external outlook due to the review of mega projects and trade tensions.

On balance, it projected a small positive output gap but noted that the risk scenario is biased towards the downside and monetary policy loosening if trade tariffs expand beyond the current US$50 billion (RM204.5 billion) of goods.

Source: The Sun Daily

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