Malaysia: Q4 GDP surprised to the downside – UOB

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting reviwed the recently published Q4 2019 GDP figures in the Malaysian economy.

Key Quotes

“Real GDP growth decelerated to a 10-year low of 3.6% y/y in 4Q19 (from 4.4% y/y in 3Q19), bringing 2019 full-year growth to 4.3% (2018: 4.7%)… Key sectors that added to the disappointment were mining and agriculture, which saw sharper declines due to ongoing supply disruptions. Manufacturing activity expanded at a slower pace as a result of weak exports. Services sector held up on robust private consumption and seasonal activity, while construction sector turned around after a pick-up in private residential work.”

“Given added risks from the coronavirus disease 2019 (COVID-19) outbreak and weaker showing in 4Q19, we are trimming our 2020 growth forecast by 0.4ppts to 4.0%. We expect a temporary dent to 1Q20 GDP growth from the COVID-19 outbreak, which will weigh on services sector particularly tourism, transport, and retail, as well as some areas of manufacturing due to potential supply disruptions in the near term.”

“We maintain our view for OPR to stay unchanged at 2.75% for now. BNM had delivered a preemptive 25bps rate cut on 22 Jan. We expect a targeted fiscal stimulus package due early March to cushion the dent in 1Q20 and aid a recovery in subsequent quarters. The next monetary policy meeting is on 3 March.”