KUALA LUMPUR (Reuters) – Malaysia’s economy is expected to have contracted for the first time in more than a decade in the first quarter as the coronavirus crisis shattered private consumption and external demand.
FILE PHOTO: A family jog at a park near Petronas Twin Towers as Malaysia reopens a majority of businesses, after a movement control order was imposed to fight the outbreak of the coronavirus disease (COVID-19), in Kuala Lumpur, Malaysia May 4, 2020. REUTERS/Lim Huey Teng
The median forecast from a poll of 12 economists was for gross domestic product to decline 1.5% in January-March from a year earlier, the first contraction since the third quarter of 2009 during the global financial crisis.
Individual forecasts ranged from GDP growth of 0.8% to a decline of 4.2%. The GDP data is due on Wednesday.
Southeast Asia’s third-largest economy took a heavy blow from sharp downturns in tourism, external trade and global crude prices, made worse by poor domestic activity due to curbs on movement and businesses, Alex Holmes, Asia economist for Capital Economics said in a research note on Friday.
“While a gradual easing of restrictions, both at home and abroad, should see activity rebound in the second half of the year, output is still likely to be much lower in 2020 than last year,” said Holmes, who forecast the economy to contract 5.0% in 2020.
Malaysia’s statistics department delayed the release of March’s factory output data to Tuesday. No reason was given, but economists expect industrial production to have fallen sharply as most factories and businesses were ordered to stop operations to curb the spread of the virus.
Exports fell 4.7% in March as shipments declined across sectors and among trade partners.
In April, Malaysia’s central bank had forecast the economy to either shrink by up to 2% or grow marginally by 0.5% this year due to the pandemic, stressing that “great uncertainty remains”.
Last week, Bank Negara Malaysia made its third consecutive cut to its key interest rate MYINTR=ECI this year, bringing it down to a historic low of 2.00%.
Domestic activity would be of greater concern for Malaysia, as the coronavirus-led movement control order (MCO) had been “relatively stringent,” Standard Chartered said in a note, adding that “the degree of uncertainty to the forecast is very high.”
“More importantly, Q2 GDP is likely to be significantly worse than Q1 as the MCO has only just been eased to conditional MCO (CMCO) beginning 4 May.”
Over 4 million people have been infected by the novel coronavirus globally as of Sunday, with more than 277,000 fatalities. Malaysia has so far reported 6,656 coronavirus cases with 108 deaths.
Reporting by Joseph Sipalan; Editing by Shri Navaratnam