World Bank revises Malaysia’s 2020 GDP growth forecast to 4.5%

The World Bank says subdued trade prospects and increased uncertainty will impact on business confidence and investment intentions. (AFP pic)

KUALA LUMPUR: The World Bank has revised Malaysia’s gross domestic product (GDP)
growth forecast for 2020 to 4.5% from its earlier prediction of 4.6% due to weaker-than-
anticipated investment and export growth in the third quarter of 2019.

In its Malaysia Economic Monitor 2019, it said that subdued trade prospects and increased uncertainty have weighed on business confidence and investment intentions.

“Public investments are likely to continue their contraction over the near term, at a lesser extent following increased planned investments by public corporations in the transport and mining sectors,” the report said.

It said export growth is likely to remain soft going into next year, reflecting subdued global investment and trade activity.

The World Bank said Malaysia’s export growth is projected to remain modest at 0.5% next year due to challenging global economic conditions and prolonged trade-related uncertainty.

“This is expected to be partially offset by a recovery in mining exports from unforeseen supply disruptions in recent quarters,” it said.

It also said business sentiments suggest that the level of confidence in the economy will remain low.

“While uncertainty regarding the global economic outlook would have an impact on Malaysia’s economy, similar uncertainty regarding the domestic economy and
political developments could exacerbate cautious sentiment, further dampening private investment,” it said.

The report said elevated government debt and liabilities and the continuing decline in government revenue, coupled with increased locked-in expenditures, will constrain fiscal policy space.

“Given the more uncertain economic environment, preserving fiscal space is important to mitigate the impact of any negative shock to the economy,” it said.

The 99-page report further said that in a subdued environment due to lack of
global demand and increased protectionist tendencies among the major economies, a sustained commitment to deepening regional integration is needed, especially on trade barriers.

“It is also important to strengthen Malaysia’s competitiveness in attracting quality investments and to improve targeting and the return on tax expenditures
so as to maximise the gains from investments towards economic upgrading, high-value job creation and inclusive growth,” it added.

However, all is not bad news as import growth is projected to pick up modestly at 0.4% in 2020, against a 2019 forecast of -1.8%, as growth of intermediate and capital exports regains some momentum with slight improvements in export and investment activity.

The bank expects private consumption to expand at a still robust rate of 6.5% next year, against 7.1% this year, due to stable labour market conditions, relatively benign inflation, and continued support from government measures.