Bank Negara predicts negative economic growth for 2020

Malaysia's economic growth will be between -3.5 percent and -5.5 percent for 2020, Bank Negara forecasts.

This is down from its economic growth forecast in April, at between -2.0 percent and +0.5 percent.

In a statement on Malaysia's economic and financial developments for the second quarter (Q2) of this year, Bank Negara said the economy was expected to rebound in 2021 at rates of 5.5 percent to 8.0 percent.

Q2 gross domestic product (GDP) growth was -17.1 percent compared with the same period last year, and -16.5 percent compared with the last quarter on a seasonally-adjusted basis.

"The decline reflected the unprecedented impact of the stringent containment measures to control the Covid-19 pandemic globally and domestically.

"In Malaysia, the nationwide movement control order (MCO) included various measures that restricted production and consumption activities.

"This resulted in demand and supply shocks that emanated not only from significantly weak external demand conditions, but also production constraints in many economic sectors.

"Additionally, there was a marked decline in tourism activity due to international border closures and restricted interstate travel. On the supply side, most economic sectors registered negative growth, while most expenditure components declined," Bank Negara said.

For the second half of the year, Bank Negara expects the economy to recover gradually as it reopens and external demand improves.

"This outlook is underpinned by the rebound of key indicators such as wholesale and retail trade, industrial production, gross exports and electricity generation," it said.

Consumption and investment activities are expected to pick up due to the government's fiscal stimulus packages and low-interest rates, the central bank added.

It also expects headline inflation for the year to be in the -1.5 percent to 0.5 percent range, and it predicted broad-based declines in prices to be limited before moving to the 1.0 percent to 3.0 percent range in 2021.

"This mainly reflects the expected recovery in global oil prices and improvement in domestic demand conditions.

"However, the outlook will continue to be significantly affected by uncertainties surrounding global oil and commodity prices, as well as the evolving Covid-19 developments," Bank Negara said. - Mkini