PM: GDP forecast remains at 4.8% for 2020 despite hit on tourism

The spread of the new virus strain will undeniably have a negative impact on the tourism sector, says Dr Mahathir


THE federal government maintains Malaysia’s GDP forecast at 4.8% for 2020, despite downside risks from the coronavirus outbreak on the country’s tourism targets.

Malaysia recently expanded its ban on visitors from China to include Zhejiang and Jiangsu Provinces amid a major tourism campaign year. The tourism drive is expected to boost the country’s economy with an estimated RM100 billion in tourism receipts with 30 million international tourist arrivals.

This year, I’m afraid the number of tourists will be less because certainly, the number of Chinese tourists will be much lesser than we had expected, Dr Mahathir (centre) said yesterday

Prime Minister (PM) Tun Dr Mahathir Mohamad said the spread of the new virus strain will undeniably have a negative impact on the tourism sector.

The outbreak has claimed 910 lives globally to date, while total infections rose past 40,000 people.

“This year, I’m afraid the number of tourists will be less because certainly, the number of Chinese tourists — the biggest group of tourists to Malaysia — will be much lesser than we had expected,” Dr Mahathir said at a dialogue session by the Malaysian French Chamber of Commerce and Industry in Cyberjaya yesterday.

China is the third-largest source of tourism revenue for Malaysia, after Singapore and Indonesia. For the first nine months of 2019, Malaysia recorded an increase of Chinese tourists to 2.41 million, up 5.7% from 2.28 million the year prior. In 2018, a total of 2.94 million Chinese tourists visited Malaysia.

The Tourism, Arts and Culture Ministry has since restructured its promotional campaign for Visit Malaysia 2020 to mitigate the sharp decline of arrivals from China by shifting its focus on markets in Europe, Australia, the Middle East, Central Asia and Russia.

The ban on travellers from China has also resulted in a wave of flight cancellations. Local carriers Malaysia Airlines Bhd (MAB), AirAsia Group Bhd, AirAsia X Bhd and Malindo Airways Sdn Bhd have already suspended their flights to China.

MAB, which is already reeling with an estimated cash injection of around RM1 billion annually, would be the worst hit with a further decline in travellers. The carrier flies to seven cities in China, including Hong Kong. AirAsia flies to about 14 cities in China, including Wuhan.

Last week, the Finance Ministry said it is working on a stimulus package to prop up the economy and support sectors that are affected by the outbreak. Details remain scarce, but Dr Mahathir said it will not involve any incentive to strengthen the ringgit.

The local currency is currently at its weakest year-to-date at 4.1475 against the US dollar. The ringgit last breached the 4.15 mark in December last year.

“I wanted to strengthen the ringgit because it was 3.8 before and now it is, at one time, 4.6-4.7. So, we thought that if we strengthened, Malaysia would pay less for our imports. But it was pointed out that if we strengthened our currency, our products would cost more and will be less competitive.”

“They believe that we are doing well with the slightly depreciated ringgit. It is now about 4.14 today and I think it is a good level. We will sustain it,” he said, adding that with good fiscal discipline, Malaysia can narrow its budget deficit to 3.2%.

China last week pumped 1.2 trillion yuan (RM700 billion) into its financial markets and lowered interest rates on reverse purchase agreements to alleviate some pressure on the stock markets on their first day of trading since Feb 24.

Despite an initial plunge of nearly 9% on the Shanghai Composite Index and the Shenzhen Component Index respectively, both indexes have since recovered to end higher recently. The Shanghai index closed 0.51% or 14.52 points higher at 2,890.49 yesterday, and the Shenzhen index at 10,728.46, up 1.1% or 116.91 points.