News: Coronavirus Outbreak To Affect Malaysia’s 2020 GDP

Feb 13, 2020

With Malaysia registering a gross domestic product (GDP) growth of 4.3% in 2019, analysts forewarn that the GDP drag may continue this year, on the back of fears that the 2019 Novel Coronavirus (COVID-19) outbreak could slow the country’s economic growth. 

Although the full-year growth is within Bank Negara Malaysia’s (BNM) projection of between 4.3% and 4.8%, the 2019 GDP could have been higher at 4.7% without the supply disturbances in the commodity sector, reported The Borneo Post.

Thus far, it was the lowest GDP recorded since the 2009 financial crisis.

BNM governor Datuk Nor Shamsiah Mohd Yunus expects the COVID-19 outbreak to impact Malaysia’s GDP growth for Q1 2020, depending on how the virus evolves and spreads.

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The policy responses by authorities will also be a factor, she said.

Hence, some measures will be rolled out in the COVID-19 stimulus package, which will be unveiled in early March at the latest, according to Finance Minister Lim Guan Eng.

Meanwhile, RAM Ratings Bhd (RAM) kept a cautiously optimistic forecast for 2020 at 4.5% despite notable downside risks brought by the virus on the services sector “such as tourism, retail and F&B – the largest sectoral component of GDP”.

“Supply chains, especially those most strongly linked to China, will also be affected by temporary factory closures. Exports of goods for both industrial and household consumption will moderate amid more sluggish external demand and lower production,” said RAM.

The length and severity of the epidemic determines the economic impact of these downside risks. “This could shave 0.2 to 0.5 percentage points off our GDP growth projection for 2020,” added RAM.

Aside from the virus outbreak, “the various trade negotiations and geopolitical risks, as well as domestic factors, including weaknesses in the commodities sector and delays in project implementation” are also some downside risks to GDP growth, said Nor Shamsiah.

Headline inflation for this year, on the other hand, is expected to average higher than last year, albeit remaining modest.

It will largely be dependent on global oil and commodity price developments as well as the timing of the lifting of the domestic retail fuel price ceilings.


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