MIDF Amanah Investment Bank Bhd Research (MIDF Research) has revised downward this year’s forecast for Malaysia’s gross domestic product (GDP) growth to 1% from 2.7%, anticipating the first half 2020 (1H 2020) data to be more precarious than before.
The research house said the revision and forecast were in light of the movement control order (MCO) extension and the likelihood of some restrictions to remain in place even after the MCO ends.
“Besides the impact from the MCO, external trade performance will be another factor.
“More countries worldwide are imposing at least partial lockdowns. These restrictions will adversely affect private consumption and investment along with external trade performances,” it said in a note today.
Nevertheless, MIDF Research expected recovery in 2H 2020 as fears from Covid-19 subsided.
Overall, the economic growth will be influenced by various internal and external factors, including disruption in global production and consumption, recession fears, global financial stability, oil price war, inflationary pressure and labour market performance, it said.
“We remain cautious that if the pandemic lasts until year-end, the economy will contract,” it added.
On private investment, the research house anticipated it to fall by 6% year-on-year (yoy) for 2020 versus 1.5% yoy in 2019, weighed by weak demand and business sentiments.
“Covid-19 is disrupting the global supply chain resulting from lower Chinese and Asian factory output,” it said.
In the mining sector, MIDF Research foresees it to contract further by 2.8% yoy from 1.5% yoy a year earlier, as the sector had been influenced by the volatility in commodity prices.
The agriculture sector’s growth is expected to experience a slight drop of 0.5% yoy, despite higher average price estimated for crude palm oil (CPO) at RM2,450 per tonne (2019: RM2079 per tonne).
“Pressure will be more on the demand side, from India, China and the European Union,” it said.
However, MIDF Research noted the government’s additional spending is anticipated to cushion the Malaysian economy from any adverse impacts, thanks to the (RM260 billion) Economic Stimulus Package comprise of one-off cash assistance, digital vouchers, energy discounts, special allowances to front-liners and wage subsidy would increase government consumption.
“Therefore, we foresee public consumption to expand higher by 6% yoy for 2020 from 2% yoy in 2019.
“Meanwhile, government investment is expected to recover marginally with softer negative growth of -9.7% yoy (2019: -10.8% yoy) due to mega projects,” it said.
However, the research house cautioned that the fiscal space is likely to be somehow limited by lower crude oil prices.
“Furthermore, the government’s priority in combating the spread of Covid-19 might delay other public investment activities,” it said. — April 13, 2020, Bernama
