News: Coronavirus: Economic Impact To Malaysia Temporary

Feb 7, 2020

MIDF Research expects the economic impact of the novel coronavirus (2019-nCoV) to be temporary as the Malaysian economy will not be directly affected. However, the research house believes the virus’ effect may be felt indirectly through external trade and investment, considering that China is Malaysia’s biggest trading partner, accounting for around 17% of its trade. 

MIDF Research based its assessment on the previous experience with Severe Acute Respiratory Syndrome (SARS) in 2002-2003, where economic growth slowed to 9.1% during the height of the SARS outbreak in Q2 from 11.1% in Q1, reported Bernama.

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“However, at the current stage, we do not foresee any significant impact of the outbreak to Malaysian economy as we believe the threat is only temporary and will be contained,” it said.

Moreover, while “all three industries — primary, secondary and tertiary — expanded at a softer pace, the economic growth quickly recovered to 10% year-on-year in the following quarter,” it added.

Its forecast is for the outbreak to be brought under control within the next six months, just like the duration it took to contain the SARS problem.

“We envisage that 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,” MIDF Research said.

Aside from maintaining its Gross Domestic Product (GDP) growth forecast for Malaysia at 4.5%, the research house also retains its 2020 export and import prediction at 1.5% and 0.8%, respectively.

Pending further insights on the virus infection, the research house reiterated that its year-end 2020 baseline target for the FTSE Bursa Malaysia KLCI stands at 1,680 points.

“As the total 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,” MIDF Research said.

 

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