Tourism sector could lose more than RM50 billion due to Covid-19, says research house

Bukit Bintang, in the heart of Kuala Lumpur, is one of the tourist areas that have been hard-hit by the Covid-19 crisis. Low tourist receipts will lower the country’s private consumption and economic growth, says Affin Hwang Capital.

PETALING JAYA: Research firm Affin Hwang Capital warns that the tourism sector could lose RM50 billion to RM60 billion in tourist receipts this year due to the Covid-19 crisis.

It said this was based on the assumption that the crisis could lead to a 60% decline in tourist arrivals, adding that low tourist receipts would lower the nation’s private consumption and economic growth.

It also forecast the nation’s real gross domestic product (GDP) in the negative territory during the first half of 2020, in view of the sharp decline in domestic demand and lower exports.

Despite the economic stimulus package recently announced by the prime minister, it also revised its forecast of the nation’s GDP growth from 3.3% to -3.5% in 2020.

“The last recession in Malaysia took place in 2009 when the real GDP contracted by 1.5%,” it said in a research report on the stimulus package today.

It said foreign investor confidence might not be restored in the short- or medium-term due to globally weak economic prospects, predicting delays or cancellations in foreign direct investments (FDIs) in manufacturing.

“Foreign investors are faced with similar challenges from Covid-19 outbreaks in their home countries,” it said.

However, the research firm said 2021 would be better domestically and globally, expecting consumer confidence and sentiment to be restored in Malaysia while households remain financially secure.

“Consumer spending will be supported by improving employment conditions and stable incomes, as global and domestic economies recover next year,” it added.

It also said the continuation of massive infrastructure projects such as the East Coast Rail Link and MRT2 would see an inflow of private investment in light of better external conditions.

“The anticipated better global economic growth prospects next year will support investment activity.

“We believe Malaysia’s economic fundamentals will remain sound, supported by the government’s fiscal discipline, a sustainable (though narrowing) current account surplus, healthy foreign-exchange reserves as well as manageable inflationary pressure.”