BNM: 2019 GDP at 4.3%, affected by supply disruption in commodity sector

BNM: 2019 GDP at 4.3%, affected by supply disruption in commodity sector

KUALA LUMPUR: Malaysia’s economy expanded by 3.6% in the fourth quarter of 2019, dragging the full-year Gross Domestic Product (GDP) growth to 4.3%, the lowest since the 2009 financial crisis amid supply disruptions in the commodity sector during the quarter.

Although the full-year growth is within Bank Negara’s forecast of between 4.3%-4.8%, it could have been higher at 4.7% if not for the supply disruptions in the commodity sector, said BNM.

The Covid-19 outbreak is expected to affect Malaysia’s GDP growth for Q1 2020, depending on how the virus spreads and evolves, according to its governor Datuk Nor Shamsiah Mohd Yunus.

In 2018, the country’s GDP growth was 4.7%.

Last year, the Malaysian economy was driven by higher private sector spending (7.4% versus 3Q 2019: 5.4%) in the fourth quarter of 2019,  she said at a press conference today.

Private consumption grew strongly by 8.1% (3Q 2019: 7 percent) , while private investment registered a higher growth of 4.2% (3Q 2019: 0.3%).

On a quarter-on-quarter seasonally-adjusted basis, the economy grew by 0.6% (3Q 2019: 0.9%).

Headline inflation was lower at 1.0% for Q4, pulling the overall 2019 inflation rate at 0.7%.

During the quarter, headline inflation averaged lower mainly reflecting the lapse in the impact from Sales and Services Tax (SST) implementation. Core inflation, excluding the impact of consumption tax policy changes, was stable at 1.4%, she explained.

Going into 2020, she said the overall impact of Covid-19 on the Malaysian economy will, however, depend on the duration and spread of the outbreak as well as policy responses by authorities.

BNM has suggested some measures would be introduced in the Covid-19 stimulus package.

Finance Minister Lim Guan Eng had said the stimulus package would be unveiled in early March at the latest and based on the impact of the virus which originated from Wuhan, China.

For the year, growth will be supported by household spending, the realisation of approved private investment projects in recent periods and higher public sector capital spending, said Shamsiah.

Nevertheless, there are downside risks to growth, said the Governor.

These include uncertainties in external conditions arising from the ongoing virus outbreak, the various trade negotiations and geopolitical risks, as well as domestic factors, including weaknesses in the commodities sector and delays in project implementation.

Thus, two-way capital flows and exchange rate volatility should be expected.

Headline inflation in 2020 is projected to average higher than in 2019, but remain modest.

The trajectory of headline inflation will be dependent on global oil and commodity price developments and the timing of the lifting of the domestic retail fuel price ceilings.

“Underlying inflation is expected to be broadly stable, reflecting the continued expansion in economic activity and the absence of strong demand pressures,” she said.