KUALA LUMPUR, March 18 (Bernama) — The nationwide movement restriction to contain the COVID-19 outbreak will adversely impact the economy in the short term, but its effects will be limited, said Kenanga Research.
Since important government and business services is run as usual, and that the restriction will last for two weeks, the research house said the full impact would depend on how fast the virus is spread, and the period taken to combat the outbreak should there be an extension of the Movement Control Order.
“Though the downside risk has somewhat elevated, we have factored in the potential economic consequences in our recent gross domestic product (GDP) forecast.
“Our base case forecast for GDP growth to moderate by 2.3 per cent in the first half of this year (1H20) is mainly due to expectation of weaker growth in the services sector as the virus will impact the transportation and tourism-related industry the most,” it said in a research note today.
Similarly, Kenanga Research said the manufacturing sector’s slowdown due to supply disruptions caused by factory closures and weak external demand from the key trading partners is expected to contribute to the slower growth momentum.
“On the demand side, we expect private consumption to ease further to 5.7 per cent in 1H20,” it said, adding that as such, the overall GDP growth is expected to moderate to 3.1 per cent this year, compared with 4.3 per cent recorded in 2019.