RHB Investment Bank Bhd is forecasting a 0% growth in real gross domestic product (GDP) for the country this year, which is within the range of Bank Negara Malaysia’s (BNM) projection.
The central bank released a report today giving a weaker growth projection of between -2.0% and 0.5% in 2020 compared with 4.3% last year.
In a research note, RHB IB said a further revision was possible, depending on how it perceived the likelihood of a recovery ahead.
“This will depend on how the government’s policies pan out in the months to come.
“Meanwhile, given the sharply moderating growth environment and weaker inflation projection, we reiterate our call for monetary policy to be reduced by another 50 basis points (bps), bringing the interest rates down to 2.0%, similar to the level seen during the global financial crisis of 2007-2009,” it said.
The investment bank said externally, BNM saw that global growth was likely to contract, leading to weak exports, amid the negative implication of the Covid-19 pandemic.
This, it said, would entail a sharp growth slowdown in the affected countries, including most major advanced and emerging market economies.
Consequently, the current account surplus is projected to narrow to 1-2% of GDP in 2020 (2019: 3.3% of GDP).
On the domestic front, RHB IB said fears of Covid-19 and measures to contain the outbreak were expected to weigh significantly on growth.
“Private sector activity will be suppressed to only essential activities, especially in the first half of 2020.
“However, these will be offset by significant fiscal and monetary interventions that should help the economy once the containment is successful,” it said.
It added that risks to growth projections were tilted towards the downside. The major uncertainty is the possible prolonged and wider spread of Covid-19, as well as its sharper negative effect on the domestic and global economies.
Other downside risks include prolonged low commodity prices and supply shocks, as well as heightened financial market volatility.
“On the upside, the fiscal and monetary stimulus could spur a stronger-than-expected consumption recovery,” said RHB IB. — April 3, 2020, Bernama
