PETALING JAYA: Fitch Solutions projected Malaysia’s real gross domestic product (GDP) growth to come in at 1.2% this year, amid a worsening external outlook due to a global recession, low oil prices and a weak private consumption outlook.
Its forecast is below Bloomberg’s consensus of 4.0%.
“First, oil exports account for more than 10% of total exports. As such, low oil prices and demand due to weak economic activity globally, will weigh on exports,” it said in a report.
Furthermore, it pointed out that oil revenues account for about a fifth of total fiscal revenues.
Therefore, the weaker oil prices and exports will translate into a reduced amount of resources the government can deploy for fiscal stimulus to shore up economic activity amid the coronavirus crisis.
Fitch Solutions also does not expect the existing fiscal stimulus measures so far to be sufficient to lift economic activity.
“This is because fiscal stimulus measures thus far has come mainly in the form of loans and loan guarantees and a loan moratorium, rather than cost reduction measures for businesses.”
It noted that the likelihood that businesses will eventually be hit with a large interest bill once the moratorium ends could see businesses decide to not take on the loan in the first place, and this would see a wave of business closures all the same.
“Meanwhile, private consumption growth will come under pressure due to extended disruptions to normal economic and social activity that Malaysia will have to maintain to curb the spread of Covid-19 in 2020, which would reduce both disposable incomes and opportunities to consume.”
