Malaysia on the verge of a recession

By NG MIN SHEN & ASILA JALIL  / pic by ARIF KARTONO

Malaysia’s gross domestic product may shrink as much as 2% this year as the coronavirus pandemic drags the world into a recession and pulls the brakes on the country’s 11 years growth trajectory. 

Bank Negara Malaysia (BNM) said the global economy is projected to register negative growth this year due to the significant economic repercussions arising from the virus.

Malaysia’s Movement Control Order (MCO) also slowed domestic economic activities, further fueling the dive into recession.

“Against this highly challenging global economic outlook, Malaysia’s GDP growth is projected to be between -2.0% to 0.5% in 2020 (2019: 4.3%),” BNM said in its 2019 Economic and Monetary Policy Review released today.Malaysia’s GDP grew 4.3% in 2019 (2018: 4.7%), the lowest since the global financial crisis.

The global slowdown and domestic pandemic containment measures will result in large output losses for the first half of this year, BNM governor Datuk Nor Shamsiah Mohd Yunus said in a live press conference today.

She said although the movement control measures will take a toll on the economy, it is “necessary to keep the pandemic at bay”, as the preservation of life is “paramount”.

“In total, the RM250 billion worth of stimulus measures are estimated to add 2.8% to the 2020 GDP growth,” she added.

Malaysia will see continued commodity supply disruptions, as the drought last year will affect oil palm yields and maintenance works will hamper production of a number of oil and gas facilities. 

BNM believes Malaysia still has strengths that have not been altered by Covid-19.

The country is not seeing price pressures, while inflationary pressures are subdued, Nor Shamsiah said.

Meanwhile, Malaysia’s current account position of the balance of payments is positive at around 1% to 2% of GDP.

The government is also expected to continue large scale infrastructure projects which will provide an additional lift to the economy. 

“We estimate that the RM15 billion in capital expenditure to build major transport infrastructure will help lift 2020 GDP growth by 1%,” Nor Shamsiah added.

Global demand should also benefit from fiscal and monetary interventions introduced by national authorities worldwide.

“These are trying times. I believe we have got what it takes to endure and emerge stronger. Malaysia has done this before and we can do it again,” she said.

BNM also has a broad range of policy instruments at its disposal, including monetary policy, macro prudential and micro prudential policy, as well oversight over financial institutions.

“These policy tools have served us well in the past. The bank has the flexibility and space to deploy these levers to promote monetary stability and financial stability and ultimately, support sustainable economic growth,” Nor Shamsiah said.