BNM believes Covid 19 impact on economy not severe if situation is contained

KUALA LUMPUR Even though the country’s economic growth for the first quarter of 2020 will be affected by the Covid 19 outbreak, it will not be severe as long as the situation is contained and private investment remained firm, Bank Negara Malaysia (BNM) said.

It really depends on how the virus spreads and evolves, as well as responses by countries to the outbreak, its Governor, Datuk Nor Shamsiah Mohd Yunus said.

If the outbreak could be contained in the very near future, the impact would not be severe. But what if it were to prolong? she told a press conference on the BNM’s fourth quarter 2019 gross domestic product (GDP) growth here, today

Nor Shamsiah said BNM has suggested several measures that would be introduced in the Covid 19 stimulus package, which is expected to be unveiled in early March at the latest.

In Malaysia, so far 18 people were diagnosed with Covid 19, which originated from Wuhan, China. Twelve of them are China nationals, while six are Malaysians.

Elaborating further, Nor Shamsiah said the outbreak could affect Malaysia’s growth through the lower arrival of foreign tourists and a decline in spending on hotels, retail outlets, transport and restaurants.

Demand and production disruptions in China would also affect Malaysia’s exports, especially manufactured and commodities exports, she said.

“The stimulus package will help the affected groups and to better secure our growth. But you need to balance the growth stimulus All these will be taken into account in the stimulus package,” she said.

For now, she said Malaysia’s GDP growth would continue to be supported by firmed private spending and investments along with modest improvement of global trade activities.

On continued private sector spending, it would be underpinned by supportive labour market conditions and gradual improvement in investment activities.

The resumption of large infrastructure projects, namely Mass Rapid Transit (MRT) 2, Pan Borneo Highway and Light Rail Transit (LRT) 3, Gemas Johor Bahru Double Track Project and East Coast Rail Link (ECRL), is also anticipated to contribute around one percentage point to the growth, she said.

Nor Shamsiah added that the recovery in commodity production and operationalisation of new facilities in mining and manufacturing sectors would also support the growth.

On the downside risk, she said a prolonged Covid 19 outbreak and re escalation of trade disputes would continue to weigh on global growth and trade activities, while domestic supply disruptions in the commodity sector also remains a risk for the country’s economic growth.

During the Severe Acute Respiratory Syndrome (SARS) outbreak in 2003, Malaysia recorded a 5.9 per cent GDP growth, while during the Middle East Respiratory Syndrome (MERS) epidemic in 2015, the nation’s economy expanded by 5.1 per cent.

On the potential adjustments of the full year 2020 GDP growth target, of which the government earlier had set at 4.8 per cent, fiscal deficit target at 3.2 per cent of the GDP, as well as the potential Overnight Policy Rate (OPR) cut for this year, Nor Shamsiah said details would be revealed in the central bank’s 2019 annual report release, slated for March 25, 2020.

The government has forecast that the economy would expand by 4.8 per cent this year.