Malaysia economy: A monetary-fiscal policy mix likely in 2020 - MARC

The Malaysian economy grew by an inflation-adjusted 4.3% in 2019. According to Bank Negara Malaysia (BNM) which released the figures yesterday, growth in 4Q2019 slipped to 3.6% from 4.4% in the preceding quarter, its slowest quarterly growth since 2009. The weaker growth was partly attributed to a slowdown in the external sector whereby net trade subtracted 0.7 percentage point from overall growth. Of note was the lacklustre performance of public investments which continued to contract by 7.7%.

The 4.3% annual GDP growth recorded in 2019 was the slowest since 2009 and stood below Malaysia’s potential growth of 4.75% as estimated by the International Monetary Fund (IMF) in 2019. The overall moderation of the economy in 2019 was a reflection of the weaker global economy following lacklustre growth in global trade, supply-side disruption and falling business capex. All these took place against a backdrop of increasing uncertainties – US-China trade tensions and rising geopolitical risks – Brexit, North Korean missile tests as well as political events in the Middle East, to name a few.

Notwithstanding this, Malaysia’s private consumption (consumer spending) supported the economy in 2019. Statistics indicate that private consumption contributed roughly 100% of the overall growth in 2019. It also represented a good 59% of the overall economy. The relatively upbeat mood among consumers prevented the economy from moderating further in 2019.