KUALA LUMPUR (Nikkei Markets) -- Malaysia's third quarter economic growth pace slowed the most in a year as mining, construction and exports contracted despite robust private consumption, official data Friday showed.
Gross domestic product of the third-largest Southeast Asian economy grew 4.4% between July and September when compared with the same quarter last year, the central bank said. The reading lagged the previous quarter's 4.9% print, and matched the median estimate in a Nikkei Markets' poll of 11 economists.
Economists said Malaysia's economy may slow further as U.S.-China trade tensions weigh on its export-focused factories, prompting Bank Negara Malaysia to consider an interest rate cut next year to spur domestic consumption and perk up growth.
"We think the economy is likely to lose more steam in the quarters ahead due to headwinds from tighter fiscal policy and a weak external environment," said Capital Economics' Analyst Alex Homes. "With growth set to disappoint BNM, the Bank is likely to opt for further loosening in 2020."
Malaysia mostly relies on domestic demand to power economic growth. However, consumer spending and business investment have decelerated, sparking worries at time when heightened external uncertainty have hurt its economy that is vulnerable to global shocks.
The services sector, which accounts for more than half of Malaysia's economic output, grew 5.9% in the third quarter. Manufacturing activities gained 3.6%, while the mining sector contracted 4.3% year-on-year. Construction output contracted 1.5% in the quarter.
Private consumption grew 7% in the third quarter from a year earlier compared with 7.8% year-on-year in the second quarter, while private investment rose 0.3% compared with the previous quarter's 1.8% gain. Exports declined 1.4%.
On a seasonally adjusted basis, the economy grew 0.9% from the previous quarter. Malaysia's central bank kept its 2019 growth projection at 4.3%-4.8%. That compares with the government's forecast of 4.7% growth for 2019 and 4.8% for 2020.
"The pace of growth is expected to be sustained for the remainder of the year and going into 2020," the central bank said. "Household spending will remain the key driver of growth, supported by continued employment and income growth."
Bank Negara Malaysia's monetary policy decisions would be data-dependent going forward, Governor Nor Shamsiah Yunus said at a news conference. "We continue to monitor external developments and how it affects our outlook for growth and inflation."
Still, private consumption is expected to remain resilient and stay around the long-term average of 7%, she said. Average headline inflation meanwhile will remain low in 2019 and modestly edge higher in 2020, she added.
BNM has kept the benchmark interest rate unchanged since cutting the overnight policy rate to 3% in May. The central bank's next policy decision is due on Jan. 22.
On Nov. 8, BNM announced a decrease in its so-called statutory reserve requirement ratio to boost flows in the financial system, although the central bank insisted that the cut was not a signal on the stance of monetary policy.
Meanwhile, Malaysia's current account surplus narrowed to 11.5 billion ringgit ($2.7 billion) in the third quarter from 14.3 billion ringgit in the previous quarter, data released separately showed.
-- Jason Ng