Malaysia’s economy surprisingly expanded in the first three months of the year, but is expected to contract in the second quarter, as the COVID-19 pandemic hits industries across the board.
GDP grew 0.7 percent in the three months through March compared with a year earlier, supported by domestic consumption, Bank Negara Malaysia (BNM) said.
That was the slowest pace since GDP shrank in 2009, and compares with a median estimate of a 1 percent contraction in a Bloomberg survey of economists.
“After a steady expansion in the first two months of the quarter, economic activity came to a sharp downshift” when the lockdown was imposed March 18, the central bank said in a statement yesterday.
“Strict measures to contain the spread of the pandemic will weigh considerably on both external demand and domestic growth,” BNM said.
“While private consumption moderated, it remained resilient, supported mainly by spending on necessities,” it said.
The service sector showed the highest growth at 3.1 percent, while manufacturing grew 1.5 percent, supported by production of rubber and plastic goods as global demand for gloves and other protective equipment surged.
The economy contracted 2 percent on a seasonally adjusted basis compared with the previous three months, BNM said.
The central bank did not update its forecasts from last month — when it said economic growth could range from 0.5 percent to minus-2 percent this year — but said activity would gradually improve in the second half of the year and notch positive growth next year.
Restrictions on movement cost Malaysia’s economy an estimated 63 billion ringgit (US$14.5 billion), according to Malaysian Prime Minister Muhyiddin Yassin, before they were relaxed on Monday last week.
The country remains in a “conditional” lockdown until June 9, but most of the economy has gradually reopened, subject to social distancing rules.
Authorities have moved to shore up the economy, with the BNM cutting the benchmark interest rate by a total of 100 basis points over three straight meetings to 2 percent, and easing banks’ statutory reserve requirements.
The government has announced 260 billion ringgit in stimulus packages, with a focus on preventing job losses and ensuring small companies can continue to be viable.
“We still forecast a significant GDP contraction this year, at minus-5.8 percent,” said Euben Paracuelles, an economist at Nomura Holdings Inc in Singapore. “With that, alongside negative inflation rates, we continue to expect more significant easing by BNM of another 50 basis points in policy rate cuts by July, possibly sooner.”
STAYING AHEAD: Fitch said that TSMC remains technologically ahead of others, but Samsung is building a new chip fab, while China is investing in its domestic industry As escalating US-China tensions and COVID-19-related production disruptions force US technology supply chains to transform, Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) US$12 billion chip fabrication plant in Arizona would be key to spurring greater US production of core semiconductor components, Fitch Ratings said. “We view the US-TSMC alliance as a first step in building a more autonomous US technology supply chain, given high barriers to entry, specifically related to the significant capital and design capability required for leading-edge semiconductor manufacturing,” Fitch said in a statement on Tuesday. “By working with TSMC, US chipmakers will not face the financial burden of incremental investment
DIVERSIFICATION: Although COVID-19 would push more companies to produce in emerging markets, DBS said that it was unlikely that firms would totally leave China Geopolitical tensions and supply disruptions are expected to accelerate the migration of manufacturing out of China, as concerns about the risk of production concentrated in one country increase, S&P Global Ratings said. Although its economic expansion might be weaker than previous levels due to the accelerated relocation of manufacturing, China’s economic growth would still be stronger than that of most other economies, the ratings agency said. “While absolute growth rates will moderate, we believe China’s economic performance will continue to be a key sovereign credit support,” S&P Global Ratings credit analyst Tan Kim Eng (陳錦榮) said in a statement on Thursday. “Its growth
Taiwan’s corporate landscape has changed significantly over the past 20 years, with Hon Hai Precision Industry Co (鴻海精密) replacing Formosa Plastics Corp (台塑) as the revenue leader, while Taiwan Semiconductor Manufacturing Co. (TSMC, 台積電) has emerged as the most profitable firm, a survey of Taiwan’s 50 largest companies published on Tuesday last week showed. The Chinese-language CommonWealth Magazine survey ranked Taiwan’s 50 largest companies based on their revenue last year, and compared them with the results of a similar survey it conducted in 2000. Only 33 companies on the original list remained in this year’s rankings, the survey found, following two
Luxury hotel Mandarin Oriental Taipei (文華東方酒店) yesterday announced that it would suspend guestroom operations and lay off related staffers from Monday, as regional border controls and travel restrictions are unlikely to be lifted anytime soon. The partial shutdown would not affect the five-star hotel’s restaurants, bars, spa, and conference and banquet facilities, which this month have almost recovered to pre-pandemic levels, it said. “Mandarin Oriental Taipei will suspend all guestroom services from June 1 due to the impact of the COVID-19 pandemic,” the hotel said after four months of maintaining normal operations proved unsustainable. The change necessitates downsizing and the hotel is handling