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Boston, MA -- (SBWire) -- 12/11/2013 --Election Pushes, Slower Global Demand Pulls

Second quarter economic growth in Malaysia came in under expectations largely, we think, because of the impact of slower Chinese growth on Malaysian exports. Q213 GDP growth came in at 4.3% year-on-year (y-o-y), half a point down on Bloomberg consensus forecasts of 4.8%. BMI believes we have yet to see the worst of China's economic slowdown, meaning that Malaysia's export drive will remain somewhat subdued.

While net exports are acting as a drag on growth, there are still some bright spots in the country's outlook, with both investment and domestic consumption looking strong. Construction activity is likely to be on the up, as many public sector infrastructure projects, part of the government's Economic Transformation Programme (ETP), have been scheduled to start up during H213. There is also a healthy pipeline of private sector investment projects. Household consumption is also holding up well, boosted by low unemployment (at a historic low of around 3%). Taking these factors into account, we are maintaining our GDP growth forecast at 4.6% in 2013, followed by 4.6% again in 2014.

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We are holding steady our 2013 forecasts for activity levels at the country's major ports (Port Klang and Port Tanjung Pelepas). While the numbers have not changed, compared to our last quarterly reports the downside risks are a little larger, due to slightly weaker export demand prospects. Bulk tonnage and container traffic will rise by between 2% and 5% this year, and we now expect most ports to lag, rather than lead GDP percentage growth.

Headline Industry Data

- The real value of Malaysia's total trade will rise by 3.4% in 2013, a small increase on the estimated 2.3% expansion experienced in 2012. 2014 growth will rise to 4.1%.
- Total cargo volume handled at Port Klang will rise by 2.9% to 203.64mn tonnes in 2013, while volume at the Port of Tanjung Pelepas will rise by a slightly higher 3.1% to 122.81mn tonnes.
- In 2014 Port Klang cargo volume growth will remain broadly steady at 2.8%, and Tanjung Pelepas will also experience a fractional slowdown to 3.0%.
- 2013 Box traffic at Port Klang is projected to rise 4.96% to 10.5mn twenty-foot equivalent units (TEUs), while at the Port of Tanjung Pelepas a gain of 2.1% to 7.86mn TEUs is expected.
- In 2014 Port Klang box traffic will rise to 8.0%; Tanjung Pelepas will see a pick-up to 4.1%

Key Industry Trends

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