Malaysia’s Q1 GDP growth slows to 0.7 per cent
Malaysia’s economy grew moderately at 0.7 per cent in the first quarter of 2020 from 4.5 per cent in the same quarter last year, as gross domestic product growth was affected by the Covid-19 pandemic and the implementation of the movement control order (MCO).
Bank Negara Malaysia (BNM) said after a 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. “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,” the central bank said in a statement, issued in conjunction with the release of Malaysia’s Q1 2020 GDP performance today.
During the quarter, BNM said headline inflation remained modest at 0.9 per cent, mainly reflecting the lapse in the remaining impact from Sales and Services Tax implementation and lower price-volatile inflation, while core inflation moderated slightly to 1.3 per cent.
On the exchange rate, the ringgit depreciated by 4.9 per cent against the US dollar during the quarter under review, following large non-resident portfolio outflows amounting to RM26.2 billion as global risk aversion intensified, in line with regional countries amid uncertainties surrounding the duration and severity of the pandemic and its economic impact. “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 in 2020. “As this environment of uncertainty will persist in the near-term, capital flows and exchange rate volatility is expected going forward,” it said.
In the first quarter of this year, the central bank said financial institutions have collectively disbursed RM62 billion financing to SMEs, of which RM48 billion for working capital purposes. Moving forward, BNM said the Malaysian economy is expected to gradually pick up in the second half of this year as containment measures are eased and the domestic MCO is lifted. “The sizable fiscal, monetary and financial measures and progress in transport-related public infrastructure projects will provide further support to growth in 2H 2020.
“In line with the projected improvement in global growth, the Malaysian economy is expected to register a positive recovery in 2021,” it said, adding that the average headline inflation in 2020 is likely to turn negative due mainly to projections of substantially lower global oil prices.
The statement added that with the gradual lifting of the movement control order (MCO) and reopening of the economic sectors, SMEs can also avail themselves to the existing financing schemes offered by the Government, the financial institutions, as well as from the remaining allocation for BNM’s Fund for SMEs (All Economic Sectors Facility, Agrofood Facility, Automation and Digitalisation Facility, and Micro Enterprises Facility). SMEs can also access financing options through the imSME platform which helps to match financing needs with a variety of fund providers that cater to SMEs.
