COVID-19: Impact and implications for Malaysia

Another unprecedented global crisis is here. This time around, the trigger is the coronavirus disease (COVID-19). The chilling effect of both the disease and the measures to suppress its spread has been unparalleled. Going forward, long-term policy implications could decide the economic fate of nations.

In Malaysia, 1Q2020 GDP growth slowed significantly to +0.7% y-o-y, the slowest since 3Q2009. On a seasonally adjusted q-o-q basis, it came in at –2.0%. However, this slowdown had been expected, given that the manufacturing sector’s performance which is based on the monthly headline IHS Markit Malaysia Manufacturing Purchasing Managers’ Index (PMI), had been moderating over the quarter.

With the Movement Control Order (MCO) extended and its eventual conversion into a Conditional MCO, Bank Negara Malaysia (BNM) expects GDP in 2Q2020 to contract. This is not surprising as the longer duration of containment measures, both globally and domestically, had largely reduced economic activities. April’s manufacturing PMI, which registered at a record-breaking 31.3 (March: 48.4), is already pointing towards that.