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Malaysia: Growth in 1Q 2020 to be affected by Covid-19 outbreak
KUALA LUMPUR: Bank Negara Malaysia expects the economy to remain supported by private sector activity in 2020 but concerns are the impact of the novel coronavirus (Covid-19) outbreak in the first quarter.
It said on Wednesday the overall impact of the virus on the Malaysian economy will, however, depend on the duration and spread of the outbreak as well as policy responses by authorities.
“For the year as a whole, growth will be supported by household spending, the realisation of approved private investment projects in recent periods, and higher public sector capital spending, ” it said.
Bank Negara said the downside risks to growth include uncertainties in external conditions arising from the ongoing coronavirus outbreak, the various trade negotiations and geopolitical risks, as well as domestic factors, including weakness in the commodities sector and delays in project implementation.
“Thus, two-way capital flows and exchange rate volatility should be expected, ” it said.
As for headline inflation, it was projected to average higher than in 2019, but remain modest.
Bank Negara said the trajectory of headline inflation will be dependent on global oil and commodity price developments and the timing of the lifting of the domestic retail fuel price ceilings.
“Underlying inflation is expected to be broadly stable, reflecting the continued expansion in economic activity and the absence of strong demand pressures, ” it said.
As for the ringgit, Bank Negara said the performance in 2020 would continue to be influenced by external developments.
“While the Phase One trade deal between the US and PR China contributed to an improved outlook on global trade, investor sentiments are also affected by concerns over the recent coronavirus outbreak.
“As a result, the ringgit depreciated by 1.3% against the US dollar this year up to Feb 10, amid weaker sentiments in global financial markets, ” it said.
Source: https://www.thestar.com.my/business/business-news/2020/02/12/growth-in-1q-202-to-be-affected-by-coronavirus-outbreak