KUCHING: Malaysia’s real gross domestic product (GDP) growth has been projected to average around 4.7 per cent for 2019 while going into 2020, it is expected to be lower amid the US-China trade deal uncertainty and geopolitical risk in the Middle East.
With slower manufacturing output as well as contraction in mining production in the October-November period, Affin Hwang Investment Bank Bhd (Affin Hwang Capital) estimated Malaysia’s real GDP growth to likely expand to 4.5 per cent for the fourth quarter of 2019 (4Q19), slightly higher than 4.4 per cent in 3Q19.
In a press release on the country’s index of industrial production for November 2019, the Department of Statistics Malaysia (DOSM) highlighted that the Industrial Production Index (IPI) grew by two per cent in November 2019 as compared with the same month of the previous year.
“The growth in November 2019 was driven by the increase in the index of manufacturing (2.5 per cent), electricity (1.6 per cent) and mining (0.5 per cent),” the press release read.
“On year-on-year basis, the manufacturing sector output rose by 2.5 per cent in November 2019 after recording a growth of 2.2 per cent in October 2019.”
On the mining sector output, it grew 0.5 per cent in November 2019 as compared to the same period of the previous year.
According to Affin Hwang Capital, for 2019 as a whole, real GDP growth is expected to average around 4.7 per cent, as with 2018 which also recorded 4.7 per cent growth.
The research firm recapped that Malaysia’s manufacturing purchasing managers’ index (PMI) returned to the 50 expansion level in December from 49.5 in November, but the sustainability of the PMI still hinges on the developments from the external front.
“Going forward into 2020, we anticipate the country’s real GDP growth to be lower but sustain at 4.5 per cent year on year (y-o-y) as compared to the official forecast of 4.8 per cent, amid the uncertainty of an ongoing trade deal between the US and China as well as the escalation of geopolitical risk in the Middle East,” Affin Hwang Capital said.
“We believe the impact will be towards the oil and gas industry, reflected also on Malaysia’s oil and gas (O&G) industry and mining production. In view of the global economic uncertainty, the World Bank, in its latest report, cut Malaysia’s GDP growth by 0.1 percentage point (ppt) to 4.5 per cent for 2020, from an earlier projection of 4.6 per cent.
“It was in tandem with the slowdown in the GDP growth of the East Asia and Pacific region which is expected to slow to 5.7 per cent in 2020 from 5.8 per cent in 2019.”
Affin Hwang Capital highlighted that while downside risks from the external economic environment remains, the country’s domestic demand is likely to remain strong in 2020.
“We believe growth in private consumption will continue to be the main driver of GDP growth with the assistance of a few catalysts including Bantuan Sara Hidup (BSH), Fuel Subsidies Program (FSP), higher minimum wages in selected cities or town, [email protected] initiative, public services bonus, tax relief as well as Visit Malaysia 2020, which is expected to provide positive impact towards tourism-related sector.”