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Economy

Malaysia GDP growth slows to 4.3%, lowest in 10 years

Central bank warns of coronavirus impact for first quarter of 2020

Malaysia's Prime Minister Mahathir Mohamad has said the government expects economic growth to come in at 4.8% this year.    © Reuters

KUALA LUMPUR -- Malaysia's gross domestic product rose 4.3% in 2019, slowing down from the 4.7% growth logged in 2018, on shrinking private consumption and slower external demand amid a gloomy global economic picture. GDP grew at its slowest pace in 10 years.

For the October to December quarter, the economy grew 3.6% on the year, -- also the lowest point since the 2009 global financial crisis -- versus an average forecast of 4.2% by 13 economists in a Reuters poll and lower than the 4.9% and 4.4% registered in the second and third quarters of 2019.

Central Bank Governor Nor Shamsiah Yunus told reporters on Wednesday that weaker net exports of goods and services, as well as slower public consumption, resulted in the fourth quarter's sluggish growth.

According to Maybank Investment Bank Research, the investment arm of Malaysia's largest bank, a drop in agriculture, mining and manufacturing output weighed on fourth-quarter growth.

The investment bank predicts Malaysia's economy will grow 4.4% this year, but says there is downside risk from the new coronavirus outbreak.

"Demand-side optics are not great, as indicators point to a slowdown in both domestic demand and net external demand last quarter. The retail trade index growth moderated, suggesting a further slowdown in real private consumption," said Maybank.

Central bank's Nor Shamsiah also highlighted that economic growth, particularly in the first quarter of 2020, will be affected by the coronavirus outbreak. However, the severity of the economic impact depends on how the virus spreads and evolves, she said.

"Coronavirus outbreak would affect Malaysia's growth through lower foreign tourists and spending on hotels, retails, transport and restaurants," she said. "Also slower demand and production disruptions in China affecting Malaysia's exports in the manufactured and commodities exports segment."

She added that the local financial industry has announced measures to assist those affected by the coronavirus outbreak, which includes moratorium and temporary relief on financial commitments from borrowers.

Malaysia's economic growth in 2020 is expected to be largely underpinned by continued private-sector spending and improvement in global trade activities, while the prolonged coronavirus outbreak, re-escalation of trade disputes and supply disruptions in the commodities sector would be the major downside risks to the growth.

Prime Minister Mahathir Mohamad has announced that the government expects economic growth to come in at 4.8% this year, backed by a rosier global economic outlook and improved private consumption.

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