KUCHING: Malaysia’s real gross domestic product (GDP) growth in 2020 is expected to be lower amid the US-China trade deal uncertainty and geopolitical risk in the Middle East.
With slower manufacturing output as well as contraction in mining production in the October-November period, Affin Hwang Investment Bank Bhd (Affin Hwang Capital) as quoted in Borneo Post estimated Malaysia’s real GDP growth to likely expand to 4.5 per cent for the fourth quarter of 2019 (4Q19), slightly higher than 4.4 per cent in 3Q19.
The Department of Statistics Malaysia (DOSM) highlighted that the Industrial Production Index (IPI) grew by two per cent in November 2019 as compared with the same month of the previous year driven by the increase in the index of manufacturing (2.5 per cent), electricity (1.6 per cent) and mining (0.5 per cent).
The manufacturing sector on year-on-year basis output rose by 2.5 per cent in November 2019 after recording a growth of 2.2 per cent in October 2019.
While on the mining sector output, it grew 0.5 per cent in November 2019 as compared to the same period of the previous year.
According to Affin Hwang Capital, for 2019 as a whole, real GDP growth is expected to average around 4.7 per cent, as with 2018 which also recorded 4.7 per cent growth.
While in 2020, the country’s real GDP growth is anticipated to be lower but sustained at 4.5 per cent year on year (y-o-y) as compared to the official forecast of 4.8 per cent, amid the uncertainty of an ongoing trade deal between the US and China as well as the escalation of geopolitical risk in the Middle East.
It believes that the impact will be towards the oil and gas industry, reflected also on Malaysia’s oil and gas (O&G) industry and mining production. In view of the global economic uncertainty, the World Bank, in its latest report, cut Malaysia’s GDP growth by 0.1 percentage point (ppt) to 4.5 per cent for 2020, from an earlier projection of 4.6 per cent.
Affin Hwang Capital highlighted that while downside risks from the external economic environment remains, the country’s domestic demand is likely to remain strong in 2020.