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Malaysia: GDP still seen at 4.0% in 2020 – UOB

UOB Group’s Global Economics & Markets Research team noted the Malaysian economy is still expected to expand around 4.0% the current year.

Key Quotes

“The Malaysian government announced a package of measures focused on “bolstering confidence, stimulating growth, and protecting jobs” in light of COVID-19 outbreak. The total package is MYR 20bn (or 1.2% of GDP), of which MYR 3.0bn is additional spending from the Federal Government, MYR 3.5bn are soft loans from BNM, and MYR 12.7bn relates to the contribution from reduction in EPF contribution rate.”

“The government revised its 2020 growth projections to 3.2% - 4.2% (from 4.8% previously). The fiscal deficit target is revised to -3.4% of GDP in 2020 (vs. initial target of -3.2% and -3.4% in 2019). We think the measures are encouraging from aspect of assistance to hardest hit sectors, affected individuals, stimulating private spending, and promoting investments. The revised growth targets are in line with our base case forecast of 4.0%, and more severe scenarios should COVID-19 drags on into 2H of the year.”

We maintain our current projections for 2020 GDP growth at 4.0% and Overnight Policy Rate (OPR) at 2.75% for now. This takes into account the fiscal support measures, preemptive OPR cut in January, and growth stabilization efforts by other countries particularly China. If the risks related to COVID-19 are prolonged, this would pose a deeper drag on the economy and warrant further OPR cuts as economic risks tilt closer to a more severe scenario.”

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