• GDP projected to grow at 4.7% in 2019 and 4.8% in 2020
   
• Fiscal deficit widened to 3.4% in 2019, 3.2% in 2020

• Inflation projected to increase 2.0% in 2020 from 0.9%

• Unemployment to remain stable at 3.3%

• Exports growth of 1.0% is slower than the estimated 2.7% growth in imports

• Broad-based growth from all sectors with service sector to be fastest-growing sector of economy

• Slightly bullish outlook for 2020

GDP projected to grow at 4.7% in 2019 and 4.8% in 2020 supported mainly by domestic demand

Malaysia's real gross domestic product (GDP) is expected to grow by 4.8% in 2020, which is slightly stronger than the pace of 4.7% in 2019. The stronger growth is underpinned by resilient domestic demand, particularly household spending, thanks to stable labour market and low inflation.

Nevertheless, in the Economic Outlook 2019/2020 report, the Ministry of Finance (MoF) warned that despite the anticipated expansion, external uncertainties may pose downside risks to growth prospects.

Private sector expenditure will remain the key growth driver in 2020, with private consumption and investment rising 6.9% and 2.1%, respectively. Although private investment is expected to grow at a slower pace in 2019, it will gain traction in 2020, following the resumption of infrastructure projects coupled with ongoing capital spending in the services and manufacturing sectors.

Favourable private sector expenditure activity will offset the impact of lower public expenditure in 2019. However, economic growth is expected to rebound in 2020 with improvement in public corporations' capital outlays.

Public sector expenditure is expected to rebound to positive growth of 0.8% in 2020 after registering 1.8% decline in 2019, largely driven by the acceleration of projects towards the tail-end of the Eleventh Malaysia Plan (11MP) coupled with the revival of strategic projects.

In line with the fiscal consolidation path, the public consumption is projected to stay moderate at 1.5% in 2020, which is lower compared to 2% in 2019.

Meanwhile, public investment is projected to improve with a mild decline of 0.6% next year after an 8.1% decrease expected in 2019.

The improvement on public investment is backed by the development of new projects in oil and gas industries such as Kasawari Gas Development, coupled with ongoing projects such as floating liquefied natural gas — 2 (LNG 2), The East Coast Rail Link (ECRL), Mass Rapid Transit Line 2 (MRT2), the Light Rail Transit 3 (LRT3), Tekai hydroelectric and Pasir Gudang combined cycle gas turbine power plant projects.

Source: BIMB Securities Research - 14 Oct 2019