Real GDP Growth to be in the Range of Between –2.0% to +0.5% for 2020

Of the annual reports released by Bank Negara Malaysia (BNM) each year to provide analysis of the country’s economic performance and outlook, we believe this year's annual report is probably the most challenging and difficult due to the uncertainty of the impact of the COVID-19 outbreak domestically and globally. There are still concerns as to when the coronavirus will reach its peak and begin to decline in the number of infected people. BNM already cautioned that economic growth prospects in 2020 will be weighed by the output loss from COVID-19 and the enforcement of the Movement Control Order (MCO), which will dampen domestic economic activity significantly. On the external front, given Malaysia’s open and highly integrated economy with the global economy, the unprecedented impact of COVID-19 and production disruptions in the global supply chain will weigh on the manufacturing sector and exports. BNM also acknowledged that “forecasting with precision the economic impact are further complicated by the diversity in the nature, scope and intensity of the policy actions, as well as the severity of the outbreak in other economies.” With uncertainty emanating from the external environment, as well as weak domestic demand conditions, BNM expects the country’s real GDP growth to be in the range of between –2.0% to +0.5% for 2020, sharply lower against the earlier official projection of between 3.2-4.2%.

BNM’s GDP growth projection for 2020 is based on certain assumptions such as price of global crude oil of US$25 to US$35/barrel (US$64/barrel in 2019) and price of LNG to average RM1,150 to RM1,250 per tonne (RM1,594/tonne in 2019). Meanwhile, the CPO price is expected to average RM2,000 to RM2,200 per tonne compared to RM2,101/tonne in 2019, with weak global GDP growth forecast, but stable inflation in the range of -1.5 to 0.5% for 2020.

Source: Affin Hwang Research - 6 Apr 2020