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Analysts: Economic impact of China virus temporary

 

 
 
People wearing face masks at the Bangunan Sultan Iskandar Customs, Immigration and Quarantine Complex in Johor Baru yesterday.

KUALA LUMPUR: The economic impact of the novel coronavirus (2019-nCoV) outbreak is expected to be temporary based on the previous experience with the Severe Acute Respiratory Syndrome (SARS), say analysts.

Research house MIDF Research yesterday said while it was maintaining its 2020 gross domestic product (GDP) growth forecast for Malaysia at 4.5 per cent, the outbreak would not impact the economy directly, but indirectly through external trade and investment.

It said China was Malaysia’s largest trading partner, accounting for 17 per cent of its trade.

“However, we do not foresee any significant impact of the outbreak to the economy as we believe the threat is only temporary.”

It said the economic growth slowed to 9.1 per cent during the peak of the SARS outbreak in the second quarter from 11.1 per cent in the first quarter.

“All three industries — primary, secondary and tertiary — expanded at a slower pace. However, the economic growth quickly recovered to 10 per cent year-on-year in the following quarter.”

Besides retaining its GDP forecast, the research house maintains its 2020 export and import forecasts at 1.5 per cent and 0.8 per cent, respectively.

MIDF Research also reiterated its year-end 2020 baseline target for the FTSE Bursa Malaysia KLCI at 1,680 points.

Its baseline scenario is for the outbreak to be brought under control in the next six months, similar to the duration to contain the 2002/2003 SARS problem.

“The equity market would be trapped in a cautious mood during the next three to five months. However, the additional region-wide financial liquidity (from further rate cuts by the People’s Bank of China in particular) may help to lend downside support.

“As the number of infected cases begins to dwindle, the market will regain its upward momentum and recover to levels prior to the onset of the outbreak.”

SME Corp Malaysia will execute a mitigation plan to help small- and medium-sized enterprises (SMEs) should the 2019-nCoV outbreak reach an alarming stage and adversely affect the economy.

Its chief executive officer, Noor Azmi Mat Said, said the agency would work with the government and relevant agencies to draw up the plan.

“The coronavirus has affected the SME industry, particularly in tourism and retail sectors.

“For example, during the recent Chinese New Year celebration, the travel industry took a hit due to booking cancellations.”

He said SME Corp would organise programmes to ensure that the SME industry could assist the government in achieving the GDP growth target.

“The programmes will be executed in collaboration with relevant agencies to develop the SME industry and ensure that we can achieve our target.”

In December, Finance Minister Lim Guan Eng said the government would maintain its projection of a 4.8 per cent GDP growth for this year despite the World Bank’s revision of its forecast to 4.5 per cent.

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