KUALA LUMPUR, April 3 2020: Bank Negara Malaysia (BNM) has projected the country’s economy to shrink as much as 2.0 per cent for 2020 due to the Covid-19 pandemic.
BNM, in its Economic Monetary Review 2019 report, concurred with the International Monetary Fund’s prediction of a worldwide recession as countries struggled to contain Covid-19.
The report said the pandemic caused significant uncertainties due to countries’ measures to halt it, which put pressure on global trade that grew by just one per cent last year due to unresolved trade tensions.
“Against this highly challenging global economic outlook, Malaysia’s GDP growth is projected to be between -2.0 to 0.5 per cent in 2020.
“The domestic economy will be impacted by the necessary global and domestic actions taken to contain the outbreak,” BNM said in the report.
The prediction is more pessimistic than the World Bank’s revised outlook of a 0.1 per cent contraction for Malaysia this year.
If the prediction comes true, it would be worse than when Malaysia’s economy shrunk by 1.5 per cent in 2009 due to a global banking crisis, but not as bad when it contracted 7.4 per cent a year after the 1997 Asian Financial Crisis.
Tourism is set to be the worst-hit sector due to the travel restrictions countries have imposed to limit their exposure to Covid-19 as well as lingering aversion to travel once the health crisis subsides.
The local economy was also vulnerable to volatility in global oil prices and key commodities such as palm oil.
BNM said the movement control order (MCO) to contain Covid-19 would weigh on economic activities but projected a recovery between the second half of 2020 and 2021.
It pointed out that aggressive measures have been taken to support the economy, citing the automatic six-month loan moratorium starting April as well as Putrjaya’s Prihatin stimulus package.