KUALA LUMPUR (April 3): The government’s recently-announced RM250 billion economic stimulus package will add about 2.8 percentage points to the country’s gross domestic product (GDP) growth in 2020, which has been revised to between -0.2% and 0.5%, said Bank Negara Malaysia (BNM) governor Datuk Nor Shamsiah Mohd Yunus.
She added the continuation of large-scale infrastructure projects, such as the Light Rail Transit 3 (RM16.6 billion), Mass Rapid Transit 2 (RM30.53 billion) and Pan Borneo Highway (RM32.5 billion), will provide an additional lift to growth of about one percentage point.
In a virtual press conference today, the governor said Malaysia’s growth this year will be challenging, affected by weak global demand, supply chain disruptions, travel restrictions and domestic containment measures.
“Growth in the first half of the year will be significantly impacted by the output losses of the Covid-19 pandemic, the movement control order (MCO) and the continued supply disruptions. While economic activity is expected to resume when the MCO is lifted, demand conditions are expected to remain soft.
“Globally as the Covid-19 [outbreak] is still evolving, travel restrictions will well continue in several countries, including advanced economies. Production shutdown will also result in prolonged disruption to global supply chains. This will continue to dampen external demand for Malaysia’s exports,” she said during the question and answer session.
However, as national authorities across the world are also introducing significant fiscal and monetary interventions, this will provide some lift to global demand, she said.
Nor Shamsiah said BNM expects growth to gradually improve in the second half as the impact of these factors begin to dissipate, with a rebound to be seen in the economy in 2021.
The recent cut in the overnight policy rate (OPR) to 2.5% will also provide support to growth, coupled with improvement in domestic demand, she noted.
This year, the central bank had already cut the OPR twice — by 25 basis points (bps) in January, and another 25 bps in March.
Economists polled by theedgemarkets.com after the second cut did not rule out a further reduction in interest rates if economic growth is further disrupted.
On whether the recently implemented six-month moratorium on loan repayments should be extended, Nor Shamsiah said it was too soon to say as it just took effect on April 1. However, BNM will closely monitor the situation and assess the need for more measures in the financial industry.
“These are trying times. I believe we have got what it takes to endure and emerge stronger. Malaysia has done this before and we can do it again.
“On our part, the bank has a broad range of policy instruments at our disposal. This includes monetary policy, macroprudential policy and as well as advisory oversight over financial institutions. These policy tools have served us well in the past. We will continue to assess the situation as it unfolds,” she said.
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