KUCHING, May 13: Malaysia’s economy grew 0.7 per cent in the first quarter of 2020 (1Q2020)
Bank Negara Malaysia (BNM) in a statement today revealed the country’s gross domestic product (GDP) growth moderated sharply as compared to a growth of 3.6 per cent in the fourth quarter of 2019 (4Q19) due to the impact of Covid-19.
The central bank noted the services and manufacturing sectors have moderated while other sectors have contracted.
In terms of expenditure, external demand and investments declined, while private consumption growth also moderated.
According to BNM, the moderation of the country’s economic growth reflected the impact of measures taken both globally and domestically to contain the spread of the Covid-19 pandemic, while the low domestic growth rate reflected the implementation of the Movement Control Order (MCO).
“After steady expansion in the first two months of the quarter, economic activity came to a sharp downshift with the implementation of the MCO on March 18, 2020.
“Movement restrictions including international and domestic travel restrictions, limited work and operating hours and mandatory social distancing significantly curtailed economic activity.
“Production was only permitted for essential goods and services and the industries integral to their supply chains. Labour-intensive and consumer-oriented sectors were also impacted,” BNM disclosed.
The central bank also revealed that the ringgit depreciated by 4.9 per cent against the US dollar in 1Q2020 following large non-resident portfolio outflows amounting to RM26.2 billion (US$6.3 billion) as global risk aversion intensified.
The outflow of funds was in line with regional countries amidst uncertainties surrounding the duration and severity of the Covid-19 pandemic and its economic impact.
While various measures have been implemented by governments and central banks globally to support the economy, BNM expressed belief investor sentiments remain affected by the weakening and uncertain outlook to global growth.
As a result of the ongoing risk aversion in global financial markets and demand for safe haven assets, Malaysia continued to experience non-resident portfolio outflows and the ringgit depreciated by 5.8 per cent against the US dollar as at May 12, BNM added.
As the environment of uncertainty will continue in the near-term, the central bank expects capital flows and exchange rate volatility going forward.
“The Malaysian economy is expected to gradually pick up in the second half of 2020 (2H2020).
“The global and Malaysian economic outlook for 2020 will be significantly impacted by the Covid-19 pandemic as strict measures to contain the spread of the pandemic, will weigh considerably on both external demand and domestic growth.
“The Malaysian economy is expected to contract in the second quarter (2Q2020). This reflects the longer duration of containment measures both globally and domestically.
“As these containment measures are eased and the domestic MCO is lifted, economic activity is expected to gradually improve in 2H 2020. The sizeable fiscal, monetary and financial measures and progress in transport-related public infrastructure projects will provide further support to growth in 2H2020.
“In line with the projected improvement in global growth, the Malaysian economy is expected to register a positive recovery in 2021,” the central bank added. — DayakDaily