The sharp economic slowdown in 4Q19 will likely continue into 1Q20. Malaysia’s near-term economic outlook has been impacted somewhat by the outbreak of Covid-19 virus, which will dampen consumer and business sentiment. This will translate into further slower real GDP growth in 1Q20. In 4Q19, the Malaysian economy ended the year on a low with real GDP growth slowing sharply to 3.6% yoy, from 4.4% in 3Q19, its slowest quarterly yoy growth since 3Q09. Malaysia’s exports growth was dragged down by the disruption from trade war effects between US and China, as reflected in the decline in net exports, where its contribution to GDP growth was lowered by -0.7 percentage points in 4Q19 compared to +1 percentage points in 3Q19, its lowest in five quarters.

Downside Risk From Covid-19 Virus to Impact on GDP Growth in 1Q20

Going into 2020, while there was some stability from the signing of the ‘Phase One’ trade deal, which help support business sentiment, the recent threat from coronavirus outbreak has reversed and weighed on the confidence of businesses and consumers, which could pose as a downside risk to Malaysia’s economic growth.

In the latest 4Q19 GDP report, BNM also cautioned that near-term growth prospects will be weighed by the ongoing Covid-19 outbreak, where it anticipates the negative impact to be felt mainly in tourism-related sectors as well as the manufacturing sector through disruptions within the global supply chain as well as the expected slowdown in China’s economic growth.

Source: Affin Hwang Research - 20 Feb 2020