This article first appeared in The Edge Malaysia Weekly on February 10, 2020 - February 16, 2020
Bank Negara Malaysia is slated to announce Malaysia’s 2019 gross domestic product (GDP) growth figures on Feb 12.
The numbers are expected to come in a tad slower than the official forecast of 4.7% for the full year — data that is likely to be cited by businesses and investors to further nudge the government to hasten the delivery of an economic stimulus package to counter the negative impact of the Wuhan virus outbreak.
According to the median and average forecasts from a Bloomberg poll of 10 economists, Malaysia’s fourth quarter GDP could come in at 4.1%, slower than 4.4% in the third quarter — bringing full-year growth to 4.5%. The most bullish 4Q2019 estimate was 4.7% and the most bearish, 3.5% — all of which point to growth being within Bank Negara’s 2019 GDP projections of 4.3% to 4.8% but below the official forecast, which needs a minimum reading of 4.8% in 4Q2019.
Finance Minister Lim Guan Eng provided a spark of hope on Feb 5 when he said the Ministry of Finance (MoF) had been tasked by the Cabinet with gathering input from various ministries to formulate a booster jab for the economy. He said there was no risk of recession in Malaysia but clarified that the soon-to-be unveiled stimulus package was meant to “ensure sustainable economic growth”.
“It’s like a mini budget,” says one economist, when asked on expectations of a stimulus. Sectors that are more affected by the novel coronavirus (2019-nCoV) outbreak would need a boost even if headline GDP numbers continue to look decent relative to global numbers, economists say.
In fact, an invite for a 2.30pm media conference by the MoF on an unspecified matter, sent out just three hours before the meeting last Friday, sparked rumours of a stimulus package being announced ahead of this week’s GDP data release — keeping a number of data watchers in suspense, despite (unofficial) reassurance that the announcement would not be what they think.
Brent crude oil prices had slipped into a bear market — closing at US$53.96 a barrel on Feb 4, down 21.7% in just one month compared with US$68.91 a barrel on Jan 6 — and casting the spotlight on Budget 2020, which was tabled last October and had assumed oil prices at US$62 a barrel.
Brent crude oil was hovering around US$55 a barrel at the time of writing. Every US$1 change in oil prices is estimated to add RM300 million to government coffers.
On a brighter note, softer oil prices cut the need for petrol subsidies. Last Friday, the MoF announced its first cut in retail pump prices since February 2019, in line with lower global oil prices. RON95, which is capped at RM2.08, was reduced by four sen per litre to RM2.04 for the week of Feb 8 to 14. Diesel, which is capped at RM2.18, was reduced by 10 sen to RM2.08 per litre.
Economists expect Malaysia’s 2020 GDP growth to range from 4% to 4.9%, averaging at 4.3%, according to Bloomberg data — below the official projection of 4.8%. Lim recently said the government had no plans to revise forecasts just yet.
The hoped-for stimulus package to bolster growth will come ahead of Budget 2021, which is slated for tabling in Parliament on Oct 2 — two months after the planned tabling of the 12th Malaysia Plan on Aug 6, official data shows.
The Federation of Malaysian Manufacturers (FMM) last Thursday urged the government to “bring forward its stimulus package” to help minimise the impact on sectors such as tourism and construction as well as export-oriented manufacturing that are heavily reliant on Chinese demand. It also urged the government to expedite the payment of RM7.8 billion in outstanding Goods and Services Tax (GST) refunds, among other things.
It remains to be seen whether the government will have good news to accompany the 2019 full-year GDP release this Wednesday — the same day the Cabinet meets again. Economists say policymakers may take a leaf from measures taken during the 2003 severe acute respiratory syndrome (SARS) outbreak as well as Singapore’s 2020 budget, which will be announced on Feb 18.
Closing at 1,554.49 points last Friday, the bellwether FBM KLCI is down 2.16% year to date but was 2.4% above the 52-week low of 1,517.61 points it reached on Feb 3.
Regional economic data releases this week include the latest Consumer Price Index and Producer Price Index readings from China on Monday as well as an interest rate decision by the Reserve Bank of New Zealand on Wednesday.
Investors will also be watching US Federal Reserve chairman Jerome Powell’s tabling of the semi-annual Monetary Policy Report to Congress before the Committee of Financial Services on Feb 11 and Committee on Banking, Housing and Urban Affairs the next day.
The 92nd Academy Awards on Feb 10 may also garner greater interest in Asia with
Parasite making history this year for being the first South Korean movie to be nominated for the best picture and best international film Oscar.
Back home, at the Kuala Lumpur High Court, former prime minister Datuk Seri Najib Razak and his spouse Datin Seri Rosmah Mansor are expected to appear in separate courtrooms for the SRC International and graft trials respectively.
On the Malaysian corporate front, companies reporting their latest quarterly earnings this week for the period ended Dec 31, 2019, include Hartalega Holdings Bhd, Gas Malaysia Bhd and Dialog Group Bhd.
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