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According to Kenanga Research, the Kenanga Investment Bank Bhd, the COVID-19 pandemic will have a limited impact on the economy in Malaysia. The research firm is confident that the growth of Malaysia’s GDV will be at 2.3% in the first half of 2020, as opposed to the forecast of 3.6% for the second half of 2020.

A lower growth forecast was projected for the first half of the year due to the virus affecting the services sector, such as the transportation and services segments. The manufacturing sector is also expected to slow down amidst the pandemic.

On the other hand, private consumption is expected to stand at 5.7% in 1H2020, which will impact the GDV by bringing it to 3.1% for the full year of 2020.

In light of the worldwide impact of the pandemic, Kenanga Research is of the opinion that an extraordinary fiscal consumption should be put into place to prevent an economic slowdown or even the possibility of a recession. It is hence forecasted that the government should add a minimum of RM3 billion to the fiscal stimulus.

As an example, it was suggested that the current ruling government should add in an additional stimulus of RM0.62 billion, or 0.04% of the GDV, on top of the RM20 billion stimulus package that was allowed by the previous ruling government.

Said a representative from the Kenanga Research arm, “Based on our forecast, this brings the fiscal deficit to 4.3% of GDP for 2020, from an earlier projection of 3.7% based on RM3.5 billion government direct contribution to the total RM20 billion stimulus package to address the COVID-19 impact (as about half or RM10 billion is funded by a 4% reduction in employees’ Employees Provident Fund (EPF) contribution and much of the balance by Bank Negara Malaysia’s (BNM) balance sheet).”

(25 March 2020)

Still too early to say whether the impact is short term or long term. The world is already in recession mode. China resuming businesses is a good thing but one step at a time. USA rushing back to business by Easter is a worst case scenario. 

  I like the headline but is that a reality? We are in the services industry and meeting people and showing properties are paramount to our success. The MCO is hindering our business progress so Covid-19 has an indirect impact on our economy as properties transactions contributes a sizeable portion to the government tax coffers as well as the economic pie.