Analysts expect Malaysia’s economy to recover from the government’s extreme containment measures to combat Covid-19’s spread in the third quarter of 2020, before hitting its considerable potential in Q4 2020.
According to them, the expected recovery would be driven by Bank Negara Malaysia’s (BNM) policy rate cuts, the RM250 billion Prihatin stimulus measures, massive infrastructure spending as well as progress in public projects.
Their comments follows BNM’s forecast that Malaysia’s gross domestic product (GDP) for this year would hover between -2% and 0.5%, down from its earlier forecast of 3.2% to 4.3%, reported New Straits Times.
Despite the potential rebound in the second half of the year, analysts concur that the pandemic and the government’s subsequent containment measures would have an adverse effect on the economy during the first half of the year. This would eventually drag the full-year GDP estimate for the country to a contraction or a small expansion, at most.
Public Investment Bank Bhd Research (PublicInvest) anticipates GDP to hover at 0.3%.
“Growth in 2020 will be supported in large part by the massive stimulus package worth RM250 billion (17% of GDP) which is our largest in history, and one of the biggest in the region,” it said in a report.
However, this would be offset by the forecasted economic loss from the virus outbreak, Mandatory Control Order (MCO) as well as commodity supply shocks.
“The growth forecast is still subject to changes given the still rapidly evolving Covid-19. Though the outlook is less-than-sanguine but economic activities are projected to recover in the second half, driven at first by public-led initiatives to be followed by private-led initiatives which is usually the case during economic shocks,” said PublicInvest.
“All in, we cautiously expect economic activities to accelerate and rebound in the 2H.”
Meanwhile, AmBank Research expects the economy to register negative growth in the first half of 2020 due to supply chain disruption, weak global demand, the MCO, travel restrictions, weak commodity prices as well as continued supply disruption within the commodity sector.
“But the economy is expected to improve in 2H, supported by fiscal and monetary measures,” noted Anthony Dass, Chief Economist at AmResearch.
“Also, the ongoing improved engagement between policymakers and businesses should result in a faster implementation and better policy consistency.”