KUALA LUMPUR: Malaysia’s economy grew at its slowest pace in nearly two years in the second quarter, the government said on Thursday, the latest negative sign for policy-makers faced with a plummeting currency and political turmoil.
Second-quarter growth was 4.9 percent, down from 6.5 percent in the same period last year, as both exports and private consumption weakened, the central bank said.
Future growth prospects for Southeast Asia’s third-largest economy—which is heavily reliant on energy exports—have come under a cloud due to the slump in world oil prices.
The ringgit currency fell to a 17-year low this week after China devalued the yuan, sparking fears Asia’s biggest economy could start a regional currency war where central banks race to devalue their units.
The ringgit has also been hit by political uncertainty stemming from allegations of financial improprieties involving Prime Minister Najib Razak.
Central bank governor Zeti Akhtar Aziz, however, said the economy would remain resilient.
“The Malaysian economy is expected to remain on a steady growth path, with domestic demand continuing to be the key driver of growth,” she said.
Domestic demand growth weakened in the second quarter, however, with private consumption expenditures expanding 6.4 percent, compared to 8.8 percent in the first quarter.
It had been widely expected to slip due to the April 1 introduction of a consumption tax that many consumers say has caused higher prices of key goods.
Najib, who also is finance minister, faces the biggest crisis of his tenure over the alleged irregularities involving debt-ridden state investment firm 1Malaysia Development Berhad (1MDB).
Questions are swirling around the whereabouts of hundreds of millions of dollars in 1MDB money, and it was revealed last month that nearly $700 million was deposited into Najib’s personal bank accounts.
The government has called them “donations” from overseas but has provided no details. Najib and 1MDB strongly deny any wrongdoing.
On Wednesday, the ringgit fell past 4.0 to the dollar for the first time since 1998, and is down more than 20 percent over the past year.