Malaysian economy grows 5.4% in 2nd quarter

Laborers work at a construction site of a commercial high-rise building in front of Malaysia’s iconic landmark Petronas Twin Towers in Kuala Lumpur on May 24, 2012. Malaysia’s economic growth slowed grew faster than expected at 5.4 percent in the second quarter, the government said Wednesday, Aug. 15, 2012. AFP PHOTO/ SAEED KHAN

KUALA LUMPUR—Malaysia’s economy grew a faster than expected 5.4 percent in the second quarter as robust domestic demand helped offset the impact of the global economic woes, the government said Wednesday.

Solid foreign demand for key Malaysian export commodities such as oil, natural gas and palm oil also contributed to the pick-up in pace for Southeast Asia’s third-largest economy, which grew a revised 4.9 percent in the first quarter.

“For the Malaysian economy, the strong support provided by domestic demand, underpinned by activities in both the private and public sectors, have ensured higher growth amidst the challenging global environment,” Bank Negara, the central bank, said in a statement.

Analysts had been expecting growth to come in at around 4.6 percent for the April-June period, said Yeah Kim Leng, chief economist with financial research firm RAM Holdings.

“The 5.4 percent growth in the second quarter suggests that Malaysia is able to weather the recession in Europe,” said Yeah.

However, he added that the second half of 2012 will be “challenging” as the impact of the European economic problems begin to be felt more acutely around the world.

Bank Negara had previously forecast full-year growth between four and five percent this year, slower than the 5.1 percent seen in 2011.

Inflation moderated to 1.7 percent in the second quarter from 2.3 percent in the previous period on declining prices of meat and vegetables, the central bank said.

Prime Minister Najib Razak, who must call fresh elections by mid-2013 and who faces a strengthening opposition, has set a goal of Malaysia becoming a “high-income developed nation” by 2020.

He said last year that annual growth of at least 6 percent was needed to achieve that.

The government has promised major infrastructure projects and financial market liberalization to attract foreign investment and boost growth, but critics say the results have been limited.