by Ranjit Singh
THE World Bank is forecasting negative economic growth for Malaysia of -0.1% for 2020 due to the Covid-19 crisis but economists believe the projection could be too optimistic.
Bank Negara Malaysia’s (BNM) Monetary Policy Committee member Dr Yeah Kim Leng tells FocusM that it would be difficult to gauge the country’s gross domestic product (GDP) this year as nobody knows the severity of the Covid-19 outbreak. Even so, he feels the figure by the World Bank is a tad too optimistic.
“It could be on the optimistic side given the economic losses arising from 4 weeks’ movement restriction and uncertainty over its extension as well as the type and extent of activities that would be allowed if partially lifted. Moreover, given that flattening the epidemic curve will consume much economic resources and sacrifice in many countries, the recovery in global demand is not expected to happen this year.
“Covid-19’s twin hit on domestic and global demand and production suggests a deeper contraction of around 4%-5%. Any growth forecast remains highly conjectural given the evolving pandemic situation in the country and across the world,” says Yeah.
World Bank lead economist Dr Richard Record was quoted as saying that net exports and investments in Malaysia are expected to experience a larger contraction in 2020, while private consumption is expected to grow at a much slower pace, from 7.6% in 2019 to 1.6% in 2020.
He also said growth in 2021 will depend on how long the Covid-19 pandemic plays out.
On Putrajaya’s economic stimulus package, the World Bank said while it could help mitigate the immediate impact of the pandemic, a deeper economic policy response would be needed should the health crisis deepen and result in a longer duration of economic disruption.
The World Bank has also sharply downgraded the growth outlook for the region in 2020. Growth in the developing East Asia-Pacific region is projected to slow to 2.1% in the baseline and to a negative 0.5% in the lower-case scenario, from an estimated 5.8% in 2019.
Bank Islam Bhd chief economist Dr Afzanizam Abdul Rashid notes that the biggest economy in the world, the US, is beginning to show signs of acute weakness as result of the virus outbreak. It has been the norm for countries to follow the cue of the US economy.
“It’s a very a conservative estimate, considering that the US economy saw the highest ever jobless claims of 3.28 million last week. Other economies too are grappling, judging from the recent Purchasing Managers Indices (PMI).
“So being an open economy to trade and investment, Malaysia’s external demand could be negatively affected. Domestic demand too is also somewhat restrictive due to the Movement Control Order (MCO). So yes, recession is already a base case for Malaysia. It is a question of how deep the recession would be,” asserts Afzanizam.
The government had imposed the MCO from March 18 to 31 before extending it by another two weeks to April 14 in an effort to reduce the number of Covid-19 cases which has spiralled to around 3,000 and claimed 45 lives. It has also caused economic activities in the country to come to a standstill and massive job losses are anticipated. – April 1, 2020
