MARC expects Malaysia's real GDP growth to decelerate to 4.3% in 2020

MARC is of the view that Malaysia’s real gross domestic product (GDP) growth will decelerate to 4.3% in 2020, below the government forecast of 4.8% due to weaker external trade performance and softer domestic demand growth.

Although trade diversion arising from trade tensions between the US and China could marginally benefit Malaysia in the short term, the overall weakening of global trade growth will continue to weigh on Malaysia’s export sector. Forward indicators suggest a lacklustre outlook, i.e. a continuing downtrend of the export orders index of US manufacturing Purchasing Managers’ Index (PMI) and a continuing contraction in global semiconductor sales.

 Domestically, Malaysia remains largely dependent on its consumer support which in the first three quarters of 2019, contributed circa 93% of headline growth. MARC does not think that this is sustainable and the latest statistics are already showing increasing cautiousness among consumers, judging from recent consumer surveys. The plus point, however, is that the labour market remains stable and supportive of consumers’ spending behavior. MARC foresees private consumption growth to soften to 6.5% in 2020.