KUALA LUMPUR, Feb 28 (Bernama) — MIDF Research has revised downward its gross domestic product (GDP) forecast for Malaysia to between 3.8 per cent and 4.2 per cent in 2020 from 4.5 per cent previously amid a challenging external environment.
“We expect the external front to stay challenging due to the effects of COVID-19, moderate commodity prices, trade tension, and political uncertainty in the US, as well as the European Union (EU),” it said in a note today.
The research house also expected deterioration in Purchasing Managers’ Indexes (PMI) figures across developed and emerging economies in the first quarter.
It pointed out that the COVID-19 outbreak is the main reason for the decline, especially due to the huge economic size of China and the spread of the virus to the US and the European Union. Global PMI surged to a nine-month high at 50.4 points in January 2020.
Domestically, the research house opined the stimulus package and easing monetary policy will support private consumption and it expected a slight rebound in private, as well as public investments.
“Political turmoil and the collapse of Pakatan Harapan-led government have caused uncertainty in the economy,” MIDF Research said.
However, MIDF Research expected the government’s fiscal plan proposed under the 2020 economic stimulus package worth RM20 billion will continue regardless of the government leadership alignment.
On another development, it said the slump in business confidence indicated the first quarter 2020 GDP to remain below 4.0 per cent year-on-year amid a challenging economic environment from both external and domestic fronts.
The research house highlighted the Business Tendency Survey that showed overall business confidence weakened to -2.1 per cent in the first quarter, the lowest point since the same quarter in 2019.
MIDF Reserach said tourism and domestic trade have been affected significantly.
“The slowdown in tourism activity can be observed as business confidence in hotels, transport and retail trade slumped,” it said.
However, it believed the stimulus package may offset the COVID-19 impact, especially via better domestic tourist movements as special incentives and the reduction in employees statutory contribution will encourage domestic spending.