KUALA LUMPUR, March 30 — AffinHwang Capital expects Malaysia’s real gross domestic product (GDP) growth to contract by 3.5 per cent this year.
Despite the announcement of the stimulus package by the government, the research firm expects Malaysia’s real GDP growth to be in negative territory possibly in the first and second quarter of 2020, on the back of a sharp contraction in domestic demand and weak exports due to uncertainties caused by Covid-19.
“Real aggregate domestic demand is expected to contract by 4 per cent for 2020 as a whole, compared with 4.3 per cent in 2019,” it said in a research note today.
In view of the negative impact on the country’s domestic demand and global supply chain disruption on Malaysia’s manufacturing and external sector, AffinHwang has cut its real GDP growth projection down to -3.5 per cent for 2020, from an earlier forecast of 3.3 per cent.
“On domestic demand, in the short term, we believe growth in private consumption will likely drop sharply, due mainly to the movement control order (MCO) from March 18- April 14, 2020.
“With the enforcement of MCO, as an example of the impact, domestic consumers’ purchases of the latest electronic gadgets (such as smartphones and tablets) as well as all other household electricals and consumer and household items, are likely to be lower and negatively impacted,” it added.
In the near to medium term, AffinHwang said private consumption growth will not be normalised as households will likely be impacted from possible temporary shocks to their incomes and a slight erosion of purchasing power.
It said households are also likely to be cautious on their spending due to the uncertain employment situation as well as affected by the expected slower growth in real disposable income.
“With a drop in commodity prices, if continue, those in the rural areas, and those involved in economic activities such as plantation, may have some impact on their incomes, therefore their contribution to consumer spending will be lower as well,” it said. — Bernama