Kuala Lumpur, 12 February 2020 – The Bank Negara Malaysia (BNM) has today announced that the 2019 Q4 GDP growth was 3.6% – the lowest quarterly growth rate in a decade. It is important to put this figure in perspective: the annual GDP growth of 4.3% is still within BNM’s target rate. It is also clear that external factors are a major contributor to the relatively low levels of growth, in particular the impact of the US-China trade war which is affecting many countries around the region. Growth in Q4 was also particularly affected by supply disruptions in the commodity sector, especially palm oil, which would otherwise register a healthier figure on the back of strong private consumption.
However, there are many other important signals in the economy that need to be taken heed of: private investment has been low for several quarters alongside falling imports of capital goods and machinery, signalling a cautionary private investment outlook. Malaysia’s stock market performed poorly in 2019. So, aside from weathering a turbulent external environment, a clear economic strategy from the government is needed to give Malaysian businesses the confidence to invest and grow.
Commenting on the figures, IDEAS CEO Ali Salman said that: “These poor growth figures need to be placed in their proper context – with the annual growth rate within the target rate at 4.3% and in the face of a challenging external environment. But they also reflect some weak conditions here in Malaysia, particularly low levels of private investment. It is clear that political uncertainty and a lack of a coherent economic strategy is undermining sentiment among private business, which is needed to drive economic growth. The government needs to move beyond the focus on politics and provide a clear direction for the Malaysian economy”.
On the need for a fiscal stimulus, Ali urged caution and clear thinking, saying that: “Government withdrawal of GST and imposition of SST was a stimulus for consumption but we have seen it was short-lived. Therefore it is important to act strategically and identify areas where government spending can contribute to long term growth. For example, given the low unemployment rate and stable private consumption, any government stimulus should give priority to boosting private investment. More importantly, any fiscal stimulus needs to be accompanied with a commitment to structural reform such as freeing up the economy from unnecessary government interventions. Spending money without a clear strategy or long term political stability will not help for long.”
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