KUALA LUMPUR: Malaysia’s economy is expected to continue expanding this year, albeit at a significantly moderated pace of 2.7% year-on-year, compared with 4.3% in 2019, says MIDF Research.
In a note, the research house said the main driver of the economic growth would be private consumption on the back of the recently-launched economic stimulus package (ESP), lower interest rate and low inflationary pressure.
“We foresee a rebound in consumer spending in the second half of 2020 as the virus is expected to be contained.
“On top of that, inflationary pressure is set to hover at low levels due to cheap fuel prices.
“The job market is expected to remain under full employment condition with the unemployment rate below 4%, supporting consumption,” it said.
Commenting on the PRIHATIN ESP launched by Prime Minister Tan Sri Muhyiddin Yassin on Friday, MIDF Research said the RM250 bil package (inclusive of the RM20 bil package announced on Feb 27) is the largest ever in the nation’s history, equivalent to 17% of Malaysia’s gross domestic product (GDP).
It said the latest comprehensive ESP comprised RM128 bil to protect the people’s welfare, RM100 bil to protect the welfare of small and medium enterprises (SMEs) and RM2 bil to strengthen the country’s economy.
Meanwhile, MIDF Research forecast Malaysia’s fiscal deficit-to-GDP ratio to widen to -5.9%, mainly due to a larger than expected contraction in government revenue as the anticipation of a slowdown in GDP growth would derail the government’s revenue target of RM244.5 bil this year.
It noted that the 2020 Budget was based on the assumption of Brent Crude oil being at US$62 per barrel and Malaysia’s GDP growth at 4.8% year-on-year and said: “We expect government revenue to be lower at RM235 bil this year, with the oil price at US$41 per barrel and GDP growth at 2.7%.”
It added that an increase in government expenditure due to the PRIHATIN ESP is another factor causing the budget deficit to widen. – March 30, 2020, Bernama
