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KUALA LUMPUR (May 13): Malaysia’s economic growth slowed to 0.7% in the first quarter of this year (Q1 2020), the lowest level seen since Q3 2009 when the economy contracted by 1.1%, according to the Malaysia Department of Statistics.
Gross domestic product (GDP) in 4Q 2019 expanded 3.6%.
Chief Statistician Datuk Seri, Dr. Mohd Uzir Mahidin, said Malaysia is expected to continue posting slower economic growth in 2Q 2020 due to the Covid-19 pandemic, based on the short-term economic direction portrayed by the Index. Principal (LI) for the reference month. February 2020.
This is supported by the downward movement under the long-term trend of LI from the reference month of December 2019.
Mohd Uzir said that GDP growth for 1Q 2020, meanwhile, was dragged down by negative growth in all sectors except services and manufacturing, which grew 3.1% and 1.5% respectively.
“Private final consumption spending this quarter was on essential products like food and non-alcoholic beverages, communication and housing, water, electricity and other fuels,” it said in a statement on Malaysia’s economic performance in 1Q 2020, today.
He added that the Movement Control Order (MCO), which began on March 18, has resulted in lower household spending, which in turn directly affected industries related to food and beverages, accommodation, transportation, sports and recreation.
This is due to the interconnection between consumption and production of goods and services.
According to estimates by the United Nations, the World Bank and the International Monetary Fund, Mohd Uzir said that Malaysia could have achieved greater economic growth without Covid-19.
The analysis, which was carried out in accordance with the National Accounts System, had projected that the local economy would grow in the range of 3.9% to 4.2% in 1Q 2020, he explained.
“With an economy valued at RM1.4 trillion and being a major trading country with an annual trade value of RM1.9 trillion, Malaysia was not spared the unfavorable global economic performance.”
According to Mohd Uzir, there are 194 industries operating in the tourism sector chain. This has significantly impacted the economy, as the tourism sector was severely affected by the Covid-19 pandemic.
The sector represented 15.2% of Malaysia’s economy, valued at RM220.6 billion with 3.5 million people employed.
“Our exports to China have decreased significantly since January. This includes services exports due to the decrease in tourist arrivals to our country,” he said.
On sectoral performance, Mohd Uzir said the service sector continued to be the main driver for the country’s economy, backed by the information and communication, wholesale and retail subsectors, as well as finance and insurance.
The information and communication subsector was promoted by the telecommunications segment, due to the phenomenon of work from home due to the MCO. Overall, growth in the services sector slowed from 6.2% in 4Q 2019.
The manufacturing sector, which also recorded slower growth from 3% in 4Q 2019, was contributed by petroleum products, chemicals, rubber and plastic (+ 3.9%), electrical, electronic and optical products (+ 2.2%) , and wood, furniture. , paper products (+ 1.3%).
Other sectors that registered a contraction in 1Q 2020 include agriculture, mining and quarrying, and construction by 8.7%, 2% and 7.9% respectively.
The growth of the agricultural sector was mainly driven by the slow subsectors of oil palm, forestry and logging, fishing and rubber. The oil palm subsector contracted further to 22% from a 16.9% decrease in Q4 2019 due to lower crude oil production.
The mining and quarrying sector, which experienced a smaller contraction in 1Q 2020 from a 3.4% decrease in 4Q 2019, was slightly dampened by the improvement in crude oil, condensate and natural gas production .
Having registered a growth of 1% in 4Q 2019, the contraction of the construction sector of 7.9% in 1Q 2020 marked its lowest number since 2Q 1999.
On the demand side, Mohd Uzir said that private final consumption spending moderated to 6.7% from 8.1% in the fourth quarter of 2019, while gross fixed capital formation registered a negative 4.6% against negative 0.7% in 4Q 2019. The latter saw a sharp drop in the three segments namely structure, machinery and equipment and other assets.
During the quarter, Malaysia recorded a surplus of RM9.5 billion in the current account balance, driven by the surplus in the goods account and a smaller deficit in
Primary Income This was after the income of foreign companies fell to RM16.3 billion versus RM25.1 billion in the previous quarter.
On the other hand, the service account posted a larger deficit of RM8 billion as a result of fewer travel activities since the coronavirus outbreak began in January. The segment posted a surplus of RM2.1 billion in 1Q 2020, the lowest level since 3Q 2003 due to the SARS epidemic.
“Financial accounts recorded a higher net outflow of RM13.3 billion in 1Q 2020 compared to RM100 million in the previous quarter. This was mainly contributed by a higher outflow in portfolio investment, due to amortization at maturity and the sale of debt securities by non-residents, “said Mohd Uzir.
“Foreign direct investment (FDI) expanded to RM6.4 billion from RM5.4 billion. FDI was mainly from the United States, Singapore and Ireland in sectors including manufacturing, finance and insurance, and mining and quarrying.
“Foreign Direct Investment (DIA) also increased to RM3 billion from RM1.1 billion. DIA’s main destinations were the UK, Indonesia and Canada for the mining and quarrying, information and communication and agriculture sectors” he added.
On Malaysia’s international investment position, Mohd Uzir said the country posted a net asset position of RM27.1 billion, after posting nine consecutive quarters of net liabilities.
International reserves stood at RM440 billion, compared to RM424 billion in the previous quarter, he noted.
Other economic indicators that were highlighted by the chief statistician were
the consumer price index (+ 0.9%), the producer price index (+ 0.6%) and the export of goods (+ 1.1% to RM238.7 billion).
Export growth was contributed by refined oil and palm oil related products, which increased by 43% and 4.6% respectively.
“Imports also increased 1.3% to RM201.7 billion. By end-use category, imports of intermediate goods increased 8.1%, followed by consumer goods, 4.8%. However, imports of capital goods they decreased by 26.8%, “said Mohd Uzir said.
Commenting on the labor market, he said that about 15.25 million people were employed in Malaysia during the quarter, 1.6% more than in the previous quarter.
However, the country’s unemployment increased to 3.5%, compared to 3.2% in 4Q 2019. This was mainly attributed to the MCO’s adverse impact on the labor market. According to him, the highest unemployment rate in the country was registered at 7.4% in 1986.
