Malaysia’s GDP likely to hover around -1.1pc in 2020, says Ambank Research

Ambank Research said the global recession was now perceived to be unlike the 1930s since the current world economy is being supported by stimulus monetary and fiscal measures, plus the gradual relaxation of lockdowns should provide some impetus to export. — Picture by Ahmad Zamzahuri
Ambank Research said the global recession was now perceived to be unlike the 1930s since the current world economy is being supported by stimulus monetary and fiscal measures, plus the gradual relaxation of lockdowns should provide some impetus to export. — Picture by Ahmad Zamzahuri

KUALA LUMPUR, May 14 — Malaysia’s gross domestic product (GDP) for 2020 could range between +0.4 per cent and -2.0 per cent but more likely to hover around — 1.1 per cent.

AmBank Research said based on the economic performance in the first quarter of 2020, the economy already inherited a weak performance from selected sectors since 2019.

The economy reported its weakest growth since the third quarter of 2009, with the first-quarter GDP growth coming in at +0.7 per cent year-on-year, beating market’s and the bank’s expectations of — 1.0 per cent and — 2.8 per cent, respectively.

“The pandemic virus impact, added with the collapse in oil prices, just aggravated some of the already weak sectors while dampening new areas of economic activities such as services,” it said in a note today.

It said the global recession was now perceived to be unlike the 1930s since the current world economy is being supported by stimulus monetary and fiscal measures, plus the gradual relaxation of lockdowns should provide some impetus to export.

Meanwhile, Public Investment Bank said Malaysia’s economic growth for the second quarter of 2020 (2Q20) will be notably affected by the Covid-19 pandemic due to the longer movement control order (MCO) period.

However, the economic growth might recover gradually in the third quarter following the reopening of the economy in early May before accelerating further in the fourth quarter, said the investment bank.

“Barring unforeseen circumstances like a sharp resurgence of Covid-19 cases, the economy may reach its potential in the fourth quarter though it is unlikely to be in full capacity due to the need for social distancing.

“This may continue to be so until there is a vaccine for Covid-19 which may at the earliest be available at the end of the year, if not next year,” said Public Investment Bank in a note today.

It added that growth prospects should improve in 2021 with the expected containment of the pandemic.

Meanwhile, ringgit’s volatility is expected to continue in the near term consistent with the higher risk aversion and downside risks on oil prices.

It said the cut in overnight policy rate (OPR) will also weigh on the ringgit in line with the bank’s projection for the year at RM4. 20 per US dollar.

Bank Negara Malaysia (BNM) has reduced the OPR three times since January in an effort to offset the economy from slipping due to Covid-19. The central bank has also slashed the Statutory Reserve Ratio (SRR) by 100 basis points in March.

This is in addition to allowing certain other measures to be undertaken, which will release RM30 billion of liquidity into the banking system.

Public Investment Bank said depending on the longevity and severity of Covid-19, a low-interest-rate environment may continue well into the next few quarters especially in the absence of a vaccine for the disease.

“A change in consumers spending habit and strict standard operating procedures for social distancing may also hurt production and demand. Should the pandemic remain a big risk especially to global trade, we reckon that BNM may opt to reduce the SRR and OPR further, which is possible thanks to muted inflation.

“Note that oil price is currently at a 20-year low with a low possibility of a sharp rebound given the negative impact of Covid-19 on major economies,” it added. — Bernama

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