By Ranjit Singh
ECONOMISTS are expecting a lower-than-expected gross domestic product (GDP) growth for 4Q19 on the back of weaker private consumption and external demand. Bank Negara Malaysia (BNM) will be announcing the country’s 4Q19 GDP on Feb 12.
Based on a Reuters poll, 13 economists are forecasting a growth of 4.2% for the fourth quarter compared with 4.7% a year ago, marking the slowest pace since 2Q16 when the GDP grew at 4%.
Sunway University professor and a member of BNM’s Monetary Policy Committee (MPC) Dr Yeah Kim Leng tells FocusM that weaker exports and lower manufacturing and commodity output are expected to translate to a lower 4Q GDP growth of 4.1-4.2% yoy in 2019.
“Sustained services output on the back of resilient household spending will likely support growth from dipping below 4% for the final quarter,” said Yeah.
He added that a 4% to 5% growth is projected for 2020 depending on the severity and duration of the Wuhan coronavirus epidemic.
The epidemic which began late last year has claimed more than 1,000 lives and has had a major impact on the tourism and aviation sectors. It is expected to spillover to affect other areas of the economy as spending becomes more selective and as trade slows.
“The spread of the virus has clouded the positive effects on global growth and trade arising from the US-China Phase 1 trade deal and increased certainty over Brexit,” said Yeah.
Prime Minister Tun Dr Mahathir Mohamad said recently the government expected growth to come in at 4.8% for 2020.
BNM has projected the GDP growth for 2019 to be between 4.3% and 4.8%. The growth was 4.5%, 4.9% and 4.4% in 1Q19, 2Q19 and 3Q19 respectively, translating to an average of 4.6% in the first nine months of the year. In 2018, the economy registered a GDP growth of 4.7% against 5.7% in the previous year.
Meanwhile, Malaysia Rating Corporation Bhd’s (MARC) chief economist Nor Zahidi Alias tells FocusM the rating firm is expecting a GDP growth of around 4.2% for 4Q19 due to weaker global trade and moderating domestic demand.
“Overall growth for 2019 would be 4.5% (2018: 4.7%). Again, softer headline growth in 2019 was due to weaker external trade performance and decelerating domestic demand growth,” he said.
Nor Zahidi added that investment was lethargic for the 9M19 period where public investments declined 12.1%.
“However, on a brighter note, Malaysia’s FDIs have been forthcoming with a net amount of RM29 bil in the first three quarters of 2019,” he said.
Domestic Direct Investments (DDI) had been lower for the first nine months of 2019, coming in at RM82.7 bil compared with RM124.2 bil for the whole of 2018.
Going forward, Nor Zahidi expected a mild recovery in public investments as the government resumes work on some of its deferred mega projects.
“We expect a mild recovery in investments as the government resumes some of the mega projects. However, the impact of the coronavirus outbreak on the global and Malaysian economies would mean headline GDP growth would likely continue to moderate in 2020.
“Our base case projection for Malaysia’s 2020 GDP growth remains at 4.3%. That said, the downside risk is increasing due to the repercussions of the coronavirus outbreak on the manufacturing and services sectors,” said Nor Zahidi. – Feb 11, 2020
