KUALA LUMPUR: Malaysia's robust economy probably slowed in the second quarter as export growth eased and consumers began to feel the effects of central bank measures to limit the rapid rise in household debt, while tourism suffered from the negative image cast by the disappearance of Malaysia Airlines Flight MH370.
Economists polled by Reuters expected gross domestic product to rise 5.8 percent from a year earlier, down from 6.2 percent in the first quarter. The forecasts ranged from 5.0 to 6.3 percent.
The economy is likely to expand 5.5 percent in 2014, according to the poll, higher than previously expected after strong exports and solid industrial production lifted growth in the first quarter.
Exports, especially electronics, have supported the growth momentum, although volatility in oil and gas exports has affected trade.
Exports grew 18.9 percent in April, nearly twice what economists had expected, buoyed by strong demand for electronics. It slowed to 7.9 percent in June.
Factory output picked up from 4.2 percent in April to 7.0 percent in June.
Domestic demand has underpinned Malaysia's robust growth, but economists expect consumer spending to cool somewhat this year as the central bank tightens up on lending. Bank Negara introduced measures last year to cool the property market, tightening loan-to-value ratios and ending a widely used developer incentive scheme for buyers.
The central bank hiked interest rates from 3.0 percent to 3.25 percent in July, in a further effort to tackle "imbalances" such as high household debt.
Most economists expect another hike of 25 basis points (bps) this year, and possibly as early as September.
"Growth and domestic consumption are still strong and this can be a double edged sword," said Weilian Wiranto, an economist with OCBC in Singapore.
"Another 25 bps hike would affect growth. In 2015 we foresee that growth would still be strong but at a reduced pace of 5.1 percent," he said.
Malaysia's services sector is expected to have suffered during the quarter after the disappearance of the MAS airliner with 239 people onboard - most of them Chinese nationals. Chinese tourist arrivals slumped in the wake of the baffling tragedy, Malaysian officials said.
Economist Chua Hak Bin at Bank of America Merrill Lynch said in a research note that "weaker tourism and retail sales probably weighed on services."
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