KUALA LUMPUR: Malaysia’s diversified export market serves as a huge advantage for the country in minimising the impact of slower demand expected from China following the 2019 novel coronavirus outbreak.
Sunway University Business School Economics Professor Dr Yeah Kim Leng said all trading countries, including Malaysia, would surely feel the pinch but the impact would be a at different level, given China’s big exposure to the global trade.
“Although China is Malaysia’s largest trading partner, our exports to other countries such as the United States and European nations are still at the same growth (rate). Our diversified export (market) will help cushion the impact,” he said.
In 2018, China exported US$1.71 tril (RM7.04 tril) and imported US$1.97 tril in goods to the global market.
Yeah said the previous epidemics in China had been contained successfully and had minimal impact on the economy, except for the severe acute respiratory syndrome (SARS) which had affected its gross domestic product by between 0.1% and 0.2%.
He said the current infection rate of coronavirus has actually reached the same scale of SARS, thus creating concerns that it might take some time for the Chinese government to contain the spread of the outbreak.
So far, there are 17,389 confirmed cases, of which 17,206 are in China. Total recovery cases stand at 487 and deaths at 362. Malaysia has eight confirmed cases, all of whom are Chinese nationals.
There is a risk of businesses closure as well as shutdown of more towns, which could curb economic activities and lead to a slowdown in the Chinese economy, Yeah said, noting that many economists are already expecting up to 0.2 percentage point to be cut from the expected growth of China’s first-quarter performance.
“At this juncture, given the strong measures taken by the Chinese government, I think the concern is more on managing the spread.
“If we can contain (the outbreak) within China, then the impact on the rest of the world will not be so severe, and the global economy can still achieve the expected rise in 2020 compared to 2019,” he added.
Yeah felt that China may need to revise downwards its growth projection should the outbreak prolong into the second quarter – “Then the whole world needs to worry.”
China has injected US$173 bil into its economy to cushion the impact on financial markets as it reopens after the week-long Lunar New Year holiday.
As for Malaysia, he said the government could consider introducing a fiscal stimulus package to boost the economy but that should only be on the table towards the second half of the year after seeing how the first half has performed.
“What is important is that our domestic sources are growing, infrastructure spending increases, commodities prices are firm and the employment rate is stable to support domestic spending.
“If (the outbreak) prolongs, then the government need to spend more and relax the fiscal deficit constraint from the 3.2% target for this year to maybe slightly higher, of 3.3%-3.4% to boost the domestic economy,” he said.
Last week, Finance Minister Lim Guan Eng announced that the government was evaluating the need for an economic stimulus package and is ready to introduce measures to deal with the effects of the coronavirus outbreak, if necessary.
For now, he said, it is important to focus and support the efforts and measures taken by the Ministry of Health to keep the people safe and free from the virus. – Feb 3, 2020, Bernama
