社会经济研究中心...社会经济研究中心 SOCIO-ECONOMIC RESEARCH CENTRE QUARTERLY ECONOMY...
Transcript of 社会经济研究中心...社会经济研究中心 SOCIO-ECONOMIC RESEARCH CENTRE QUARTERLY ECONOMY...
社会经济研究中心
SOCIO-ECONOMIC
RESEARCH CENTRE
QUARTERLY ECONOMY TRACKER
(APR-JUN 2020)
Getting the Economy Back on Track
Executive Director
9 July 2020
Lee Heng Guie
1Socio-Economic Research Centre
Outline
Predictions of the World Economy Post
COVID-19 Pandemic
Malaysia’s Post- MCO Recovery Tracker
Rebooting Malaysia – Recovery, Revitalise
and Reform
2
As the global economy emerges from
COVID-19 pandemic, governments
are grappling with policies how to
move forward, how to recover
growth, how much structural
adjustment to make and how long to
maintain the financial support?
Predictions for the Global Economy
3Socio-Economic Research Centre
Source: IMF (WEO Update, Jun 2020)
4.8
2.53.0
4.3
5.44.9
5.5 5.6
3.0
-0.1
5.4
4.33.5 3.5 3.6 3.5 3.4
3.9 3.62.9
-4.9
5.4
-8.0
-3.0
-10
-8
-6
-4
-2
0
2
4
6
8
10
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020F
2021F
World Advanced Economies Emerging market & Developing Economies
Real GDP Growth (%)
• An uneven and gradual recovery
• Global activity in 1H 2020 has experienced a sharp and synchronized contraction greater
than anticipated
• The question is how effective the policy countermeasures to limit economic damage?
“Extraordinary Uncertain” path to global recovery
4Socio-Economic Research Centre
Global Growth Scenarios for 2020-2021*
Scenario Projected global
GDP growth in
2020
Projected
global GDP
growth in 2021
Upside • Global growth stabilisation and recovery.
Disruptions from pandemic fade in 2H
• COVID-19 outbreak is contained in 2H
2020. Hopeful vaccine will be found in
2021
• Monetary and fiscal stimulus are working
0.5% 5.0%
Base Case • Global stabilisation and moderate
recovery in 2H 2020
• A prolonged COVID-19 outbreak,
disrupted supply chains, financial
turbulence; geopolitical shocks
• Monetary and fiscal stimulus are working
-3.0% 4.5%
Downside • Deeper global recession
• Deepening impact from a prolonged
COVID-19 outbreak
• Ineffective monetary and fiscal policy
stimulus
• Sharp correction in global equities and
commodities market
-5.0% 2.0%
* SERC’s estimates
5Socio-Economic Research Centre
2.3
1.0
-0.7
7.0
4.15.0
3.6
6.7
1.01.5
6.0
0.3
-3.1
-1.7
3.73.1 3.0
0.7
-0.2-0.7
-1.8
-6.8
-10
-8
-6
-4
-2
0
2
4
6
8
10
12
US Euro Area Japan Vietnam India Indonesia Malaysia Philippines Singapore Thailand China
2019 Q4 2020 Q1Real GDP growth (%, YoY)
Advanced economies Regional economies
▲ Large and timely policy responses
▼ Severe labour market dislocations
▼ Lockdown has shutteredeconomic activity
▲ Supportive policy stimulus,anchored by projectedrecovery in China
▼ Weaker external and domesticdemand conditions
Source: Officials (unadjusted data except Euro Area); IMF
-8.0[2.3]
-10.2[1.2]
-5.8[0.7]
2020F*[2019]
-[7.0]
-4.5[4.2]
-0.3[5.0]
-3.8[4.3]
-3.6[6.0]
-[0.7]
-7.7[2.4]
+1.0[6.1]
* IMF, World Economic Outlook Update, Jun 2020
Global economic contraction – What has happened so far?
6Socio-Economic Research Centre
Decoupling of real economy from stock market
KEEP the system
from imploding
KEEP people who’ve lost
jobs from real desperation
STOP companies’ liquidity problems
and sovereignty problems
SOME
CAPACITY
DESTROYED OR
DECREASED
CAPACITYMASSIVE JOB
CUTS AND
INCOME LOSS
DECLINE IN
PRODUCTIVITY
REDUCED
INVESTMENT
CONSUMER
SENTIMENT AND
SPENDING
UNEMPLOYMENT
AND WAGE
GROWTH
Extraordinary interventions by governments and central banks
A V-shaped recovery in stock market but not for global economy
Three indicators to ascertain the strength of recovery
PURCHASING MANAGERS’
INDEX (PMI) FOR
MANUFACTURING & SERVICES
7Socio-Economic Research Centre
95.7
94
96
98
100
102
Jan2016
Jul Jan2017
Jul Jan2018
Jul Jan2019
Jul Jan2020
OECD US EA19 Japan
Composite Leading Index (CLI)A gauge of economic outlook (Long-term average = 100)
-16.2
-12.1
-20
-15
-10
-5
0
5
10
Jan2016
Jul Jan2017
Jul Jan2018
Jul Jan2019
Jul Jan2020
World Trade Volume World IPI
World Trade and IPI%, YoY
47.8
48.0
20
25
30
35
40
45
50
55
60
Jan2016
Jul Jan2017
Jul Jan2018
Jul Jan2019
Jul Jan2020
Manufacturing Services
Global PMI for manufacturing and services
(50 = no change on prior month)
5.8
-40-30-20-10
01020304050
Jan2016
Jul Jan2017
Jul Jan2018
Jul Jan2019
Jul Jan2020
Worldwide USA China
Global Semiconductor sales
(%, 3-month moving average YoY)
Source: OECD; IHS Markit; SIA
WTO expects world trade to
decline between 12.9% and
31.9% this year
Is there a silver lining
for the semiconductor
industry?
Mfg
Serv
High-frequency data suggest steepest economic slump has
bottomed out
8Socio-Economic Research Centre
Post-Great Lockdown: Global mobility tracker
60
80
100
120
140
160
180
200
1 Mar 1 Apr 1 May 1 Jun 1 Jul
Flights Tracked
-100
-80
-60
-40
-20
0
20
40
1 Mar 1 Apr 1 May 1 Jun 1 Jul
Australia Germany
United Kingdom United States
-100
-80
-60
-40
-20
0
20
1 Mar 1 Apr 1 May 1 Jun 1 Jul
Brazil Germany SpainFrance UK ItalyNetherlands US
-100
-80
-60
-40
-20
0
20
1 Mar 1 Apr 1 May 1 Jun 1 Jul
Brazil Germany SpainFrance UK ItalyNetherlands US
Source: Flightradar24; OpenTable; Google Mobility
% change vs. same day of
same week one year ago
Number of flights tracked have bottomed out Restaurant bookings
Time spent in workplacesTime spent in retail and recreation
%, 7-day moving average %, 7-day moving average
(‘000, 7-day moving average)
9Socio-Economic Research Centre
We caution developments that would trigger a reversal in
riskier assets’ prices
A protracted
and deeper
recession than
anticipated.
Stemming from a
second wave of
infections,
compelling more
restricted
movements and
containment
measures
Investors pare
down
expectations
and lower
optimism about
the central banks’
continued
liquidity support
Investors
reassess their
appetite and
pricing of risk
on worse-than-
expected
corporate
earnings. Assets’
repricing could
result in a sharp
tightening in
financial
conditions,
causing stock
market volatility
Renewed trade
tensions
between the US
and China
The US
Presidential
Election
outcome in
November and
potential policies’
ramifications
Geopolitical
tensions could
lead to a reversal
in investors’
sentiment
1 2 3 4 5 6
10Socio-Economic Research Centre
48.4
79.8
128.3
0
20
40
60
80
100
120
140
160
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Ja
nF
eb
Ma
rA
pr
Ma
yJu
n
Average 2020
Commodity Price Index(2010=100)
Energy Non-energy Precious Metals
Source: World Bank; MPOB
3,014
2,074
2,412
1,000
1,500
2,000
2,500
3,000
3,500
0.0
0.5
1.0
1.5
2.0
2.5
2015
2016
2017
2018
Jan
Feb
Ma
rA
pr
Ma
yJu
nJu
lA
ug
Se
pO
ct
No
vD
ec
Ja
nF
eb
Ma
rA
pr
Ma
yJu
n
Average 2019 2020
CPO Stock (LHS) CPO Price (RHS)
CPO Price(Local delivered, RM/tonne)
CPO Stocks(million tonne)
Brent spot price:
Jan-29 Jun 2020:
US$40.22/bbl
(2019: US$64.36/bbl)
Crude oil prices seem stabilising; Crude palm oil prices on
the mend
11Socio-Economic Research Centre
-1
0
1
2
3
4
5
6
7
2000 02 04 06 08 10 12 14 16 18
Policy Rate (%)
Fed ECB BOJ
Profoundly low interest rates are here to stay
Note: Interest rate on deposit facility applied as ECB’s policy rate
Source: Fed; ECB; BOJ, Official central banks
2020
Jun
0
1
2
3
4
5
6
7
8
9
10
2008 09 10 11 12 13 14 15 16 17 18 19
Policy Rate (%)
Malaysia India South Korea
Indonesia Thailand Philippines
2020
Jun
If 2008-09 GFC was the “too big to fail” crisis, 2020 is the “too many to fail” version: Central
bankers cannot allow a domino effect of firms collapsing for fear that the economic damage
will be so severe.
12
Aggressive policy responses to limit
economic repercussions
• PRIHATIN & PENJANA: RM295bn or
21.1% of GDP
• Direct fiscal injection: RM45.0bn or
3.2% GDP
The Malaysian Economy
13Socio-Economic Research Centre
5.0
3.0
3.2
3.4
3.6
3.8
4.0
4.2
4.4
4.6
4.8
5.0
-20
0
20
40
60
80
100
120
140
160
180
Jan2019
Apr Jul Oct Jan2020
Apr
Monthly Changes of Unemployed Persons
Unemployment Rate
Unemployment Rate(%)
Monthly Changes of
Unemployed Persons(‘000)
Jobless rate hit a record 5.0% in April (number
of unemployed persons increased by 261,800 to
778,800 in April 2020 vs. end-2019: 517,000).
Expect unemployment rate to reach 5.5%-6.5%
in 2Q-3Q in 2020.
A vicious cycle of job loss and income
retrenchment
Lockdowns and
production
shutdowns/disruptions
Job and income
losses in affected
sectors
Weaker domestic
demand
Job and income
losses in initially
unaffected sectors
Even weaker
demand
The vicious cycle
Source: BNM; DOSM
COVID-19’s supply shock induced demand shock’s vicious cycle
14Socio-Economic Research Centre
PROTECTING RAKYAT
PRIHATIN Economic Stimulus Package (ESP) – Status update
Source: LAKSANA Report
SUPPORTING BUSINESS
Bantuan Prihatin
Nasional (BPN)
Benefitted 10.2 millionindividuals & households
Distributed RM10.9 billion
Achievement status: 97.5%
EPF’s i-Lestari
Benefitted 4.3 millionindividuals
Withdrawal up to RM2.2
billion a month
KWSP contribution rate
reduced from 11% to 7%
Benefitted 5.7 million EPF
contributors
Total reduction: RM1.9 billion
1.85 million opt to maintain at 11%
SME Soft Loan Funds
Benefitted 20,104 SMEs Approved loan amounted to
RM8.7 billion
PRIHATIN Special
Grant (GKP)
Benefitted 544,632 micro
enterprises Approved grant amounted to
RM1.6 billion
Grant for small scale
government projects
Allocated RM3.8 billion for
SMEs to kick-start public
projects awarded
STRENGTHENING ECONOMY
As of 5 Jun
As of 19 Jun
As of 26 JunAs of 6 Jul
As of 6 Jul As of 6 Jul
15
Economic and Business impact –
Counting the cost
The Malaysian Economy
16Socio-Economic Research Centre
PRIHATIN’s measurable impact:
PENJANA – Short-term Economic Recovery Plan
76.6% 65.5% 61.4%Salary
payment
No
customers
Rental
payment
Source: PENJANA Short-Term Economic Recovery Plan; DOSM Special Survey on COVID-19 Impact on Business Sector (10 Apr -1 May)
Many businesses still concerned about 3Cs and struggling to cope several challenges:
Saved 2.7
million jobs
Wage Subsidy Programme
Eased more than 10
million individuals’
cash flow burden
Bantuan PRIHATIN Nasional (BPN)
Loans moratorium EPF’s i-Lestari
Supported 800,000
businesses and
micro SMEs
Various financial assistance
Loans moratorium
Cash flow Costs Credit
THREE MAIN ISSUES/CHALLENGES
IMMEDIATE
CHALLENGES
STRUCTURAL
CHALLENGES
Revive demand
Supply disruptions
Cash flow problem
Operating costs
Consumer behaverioul
protocols
Standard Operating
Procedures
Intense competition in online
business and e-commerce
Employment Retention
Programme
17Socio-Economic Research Centre
Unemployment Job savings program
• Unemployment rate jumped to 5.0% in April
• Expect further rise to 5.5%-6.5% in 2Q-3Q
• EIS data (Jan-4 Jul 2020): 53,952 persons loss
of employment (vs. 40,084 in Jan-Dec 2019)@
• A rebound can’t truly get underway until people
are able to go back to work and jobless rate
recedes from a record high
• 2.7 million jobs saved (2.5m via WSP; 0.2m via
ERP)
• Both the number of employers applied and
employees benefited from WSP and ERP
moderated sharply in May-Jun
• ERP (wage subsidy on no pay leave) may
presage the potential loss of employment
3.3 3.2 3.3
3.9
5.0
Avr
Ja
n
Feb
Ma
r
Ap
r
2019 2020
Malaysia’s post COVID-19 recovery tracker
Source: DOSM; PERKESO
5.84.6 5.3
6.1
10.1
18.6
3.5
Ja
n
Feb
Ma
r
Ap
r
Ma
y
Ju
n
Ju
l
Unemployment Rate%, YoY
Wage Subsidy Program
(WSP)(‘000, applications)
Employment Retention Program
(ERP)(‘000, applications)
0
50
100
150
200
250
300
Mar Apr May ^Jun
Loss of Employment(‘000)
0
500
1,000
1,500
2,000
2,500
Apr May Jun Jul
Employers Employees
2020 2020 2020
^ As of 21 June
*
* As of 4 July
@ Unemployment claims under Employment Insurance System (EIS)
#
# As of 3 July
18Socio-Economic Research Centre
Consumer sentiment Buying a car
• Consumers’ optimism has suffered a record
plunge
• Until Malaysians feel safer from the virus and
have secured job and income, they won't regain
confidence and spend normally hurdle to a
strong recovery
• While sales tax exemption would spur demand,
car buyers won’t return in droves and make the
biggest purchase unless they have secured job
and income as well as can get a loan
• PENJANA: Exempts sales tax on passenger
cars (100% for locally assembled (CKD) and
50% for imported (CBU)) till end-2020
85.693.0
84.0 82.3
51.1
Q12019
Q22019
Q32019
Q42019
Q12020
Malaysia’s post COVID-19 recovery tracker (cont.)
Source: MIER; BNM
MIER Consumer Sentiment Index (CSI)Optimism Threshold = 100
Passenger Car Sales (Volume)%, YoY
-11.5-0.1
-59.6
-99.7
-63.4
Jan Feb Mar Apr May
2020
19Socio-Economic Research Centre
Shopping at retailers Production & manufacturing sales
• Footfall in major shopping malls about
between 50%-70%, but sales are up to 40%
vs. pre-MCO
• Amid wary about the virus, social distancing and
SOP are likely to discourage many people away
when stores reopen
• How fast they return is critical for domestic
consumption and spending
• Manufacturing capacity has gradually
restored back to 70%-80% and 90%-100% for
some strong products demand industries (still
low around 30%-50% for wearing apparels)
• Sharp plunge in industrial production and
manufacturing sales will hit the peak in 2Q and
will improve to decline shallowly in the
months ahead
Malaysia’s post COVID-19 recovery tracker (cont.)
Source: DOSM
0.6
6.2
-4.9
-32.0
2.4
7.6
-3.0
-33.0
Jan Feb Mar Apr
Industrial Production Index (IPI)
Manufacturing Sales
Retail Sales%, YoY
Industrial Production and Manufacturing Sales%, YoY
6.7 6.3
-6.6
-32.4
Jan Feb Mar Apr
20202020
20Socio-Economic Research Centre
External trade Consumer Price Index (CPI)
• Exports contracted sharply due to lockdown
impact on demand from our major buyers amid
supply chain disruptions
• Our major trading partners’ pace of economic
recovery in 2H 2020 would help to lift export
growth and support the economy
• Deflation inflicted by lower petrol prices and
electricity tariff discounts amid slow price
increases in other main groups. Capacity slack
and oversupply amid slower demand
• As long as there is no a broad-based decline in
prices for a sustained period, says at least more
than a year, it is a lesser concern about deflation
-1.5
11.8
-4.7
-23.9-25.5
-2.4
11.3
-2.7
-8.0
-30.4
Jan Feb Mar Apr May
Exports
Imports
Malaysia’s post COVID-19 recovery tracker (cont.)
1.61.3
-0.2
-2.9 -2.9
-2.2-2.6
-21.5 -20.8-25
-20
-15
-10
-5
0
5
10
-5
-4
-3
-2
-1
0
1
2
Jan Feb Mar Apr May
Headline Inflation (LHS)
Housing, Water, Electricity, Gas& Other Fuels Inflation (LHS)
Transportation Inflation (RHS)
External Trade%, YoY
Inflation by Selected Components%
20202020
Source: DOSM
21Socio-Economic Research Centre
Loan financing Daily flying passengers
• Business loan growth (4.5% yoy in May and
4.7% in April) and households’ demand eases
• As of 6 July, total loan moratorium amounted
to RM51.4 billion (RM33.4 billion for individuals
and RM17.9 billion for businesses)
• Real test is the expiry of loan moratorium in
September
• Air passengers traffic has already dropped due
to the pandemic outbreak and lockdown in China
before the starting of domestic MCO and the
Great Lockdown
• Following the inter-state travel and on-going
negotiations to allow cross-border travel using
the “Green Bubble" countries method, the
aviation and travel industry will be gradually on
the mend
Malaysia’s post COVID-19 recovery tracker (cont.)
Source: BNM; MAHB
4.5 4.4
3.73.3 3.2
2.0
3.2
4.45.1 4.9
Jan Feb Mar Apr May
Household SectorBusiness and Other Sectors
6.6
-23.4
-63.6
-98.4 -97.0Jan Feb Mar Apr May
Domestic International Total
Loan Outstanding%, YoY
Growth%, YoY
20202020
22Socio-Economic Research Centre
-32.0
-40-35-30-25-20-15-10-505
10
Jan2018
Apr Jul Oct Jan2019
Apr Jul Oct Jan2020
Apr
Overall IPI Manufacturing Mining
Industrial Production Index (IPI)% YoY
-25.5
-30.4-35
-25
-15
-5
5
15
Jan2018
Apr Jul Oct Jan2019
Apr Jul Oct Jan2020
Apr
Exports Imports
Exports and Imports%, YoY
Source: DOSM; IHS Markit
-27.6
-32.4-35-30-25-20-15-10-505
1015
Jan2018
Apr Jul Oct Jan2019
Apr Jul Oct Jan2020
Apr
Wholesale Retail
Wholesale and Retail Trade%, YoY
51.0
30
35
40
45
50
55
-40
-30
-20
-10
0
10
Jan2018
Apr Jul Oct Jan2019
Apr Jul Oct Jan2020
Apr
IPI - Manufacturing PMI - Manufacturing
Manufacturing
Production Index (IPI)% YoY
Purchasing Managers’
Index (PMI)50 = no change on prior month
WS
RT
Exp
Imp
High frequency data show a sharp contraction to peak in 2Q
23Socio-Economic Research Centre
-2.9
1.1
-3
-2
-1
0
1
2
3
Jan2018
Apr Jul Oct Jan2019
Apr Jul Oct Jan2020
Apr
Headline Inflation Core Inflation
Inflation Rate%
5.0
3.0
3.4
3.8
4.2
4.6
5.0
5.4
5.8
02468
101214161820
Jan2018
Apr Jul Oct Jan2019
Apr Jul Oct Jan2020
Apr Jul
Th
ou
sa
nd
s
LOE Unemployment Rate
Unemployment Rate(%)
Loss of Employment (LOE)(‘000)
-6.3
-10
-5
0
5
10
15
Q12016
Q3 Q12017
Q3 Q12018
Q3 Q12019
Q3 Q12020
Construction – Value of Work Done%, YoY
High frequency data show a sharp contraction to peak in 2Q
(cont.)
2.3
0
2
4
6
8
10
Q12016
Q3 Q12017
Q3 Q12018
Q3 Q12019
Q3 Q12020
Index of Services%, YoY
Source: DOSM; PERKESO
23% in manufacturing;
14% in wholesale and retails
58% (Professionals, managers,
executives and technicians)
*
* As of 4 Jul
24Socio-Economic Research Centre
Our channel checks on reopening of the economy
Most business
have started
operation
15.0 million (98.8%)
employees returned
to work currently (vs.
10.2 million @ 67.2%
as of 17 May)
Manufacturing plants:
Mostly have resumed
operations (70%-80%
capacity utilization rate)
For electronics and
automation companies
• 40% operating at 100%
• 40% above 80%
• 20% between
50% and 60%
Footfall/foot traffic
about 50%-70%
Major shopping malls:
Sales are up to 40%
compared to pre-MCO
25Socio-Economic Research Centre
Our channel check on reopening the economy (cont.)
56%-82% of the construction sites have complied with SOP.MAH survey: Occupancy rate is expected to rise
from 15.83% at end-June to 32.10% at end-Dec
2020
Hotels:
Overall occupancy
rate still below 30%
MAH survey: 15% will
close business
permanently and 35% temporarily
Restaurants/coffee shops:
Dined-in was constrained by
decreased seating capacity
(social distancing)
Potential loss of key
sources of income
(functions/events/wedding
dinner) for August
Construction:
During the sites inspection
made between 22 June-1
July, about 9%-29% of
construction sites have not
started operations
26Socio-Economic Research Centre
Reopening economy: Malaysia’s mobility tracker
Source: Google Mobility
Time spent in transit stationsTime spent in grocery and pharmacy
%, 7-day moving average %, 7-day moving average
-60
-50
-40
-30
-20
-10
0
10
1 Mar 1 Apr 1 May 1 Jun 1 Jul
Grocery and Pharmacy
-90-80-70-60-50-40-30-20-10
0
1 Mar 1 Apr 1 May 1 Jun 1 Jul
Transit Stations
MCO MCOCMCO CMCO RMCORMCO
-90-80-70-60-50-40-30-20-10
0
1 Mar 1 Apr 1 May 1 Jun 1 Jul
Retail and Recreation
-70-60-50-40-30-20-10
010
1 Mar 1 Apr 1 May 1 Jun 1 Jul
Workplaces
Time spent in retail and recreation Time spent in workplaces
%, 7-day moving average
MCO CMCO RMCO
%, 7-day moving average
MCO CMCO RMCO
27
Prospects in 2020-2021 – What might the
recovery look like?
The Malaysian Economy
28Socio-Economic Research Centre
• Malaysia must be prepared for a challenging nature and complexity “new normal”
path ahead post the COVID-19 global pandemic.
• Given the following evolving economic and financial developments, downside risks to
economic growth remain in 2020-2021.
GLOBAL RECESSION IN 2020 – HOW DEEP AND DURATION? SLOW
RECOVERY IN 2021-2022
VOLATILITY RISK IN GLOBAL FINANCIAL MARKETS
MODERATING COMMODITY PRICES
SOFTENING CRUDE OIL PRICES
WEAKENING DOMESTIC AND BUSINESS CONDITIONS
VOLATILITY RISK IN STOCK MARKET AND WEAK RINGGIT
LINGERING CONCERNS ABOUT THE US-CHINA’S TRADE TENSION
Malaysia: Be prepared for an uneven & gradual global recovery
29Socio-Economic Research Centre
Positive Outlook
“Sudden stop” in activity in 2020 will normalise
in 2021 amid some permanent loss in output
Technical base comparison sees a “sharp”
bounce in annual growth comparison in 2021
Services and tourism-related sectors will be
revitalised as tourist arrivals resume gradually
Construction: Supported by on-going public
infrastructure projects and new projects
Exports will rebound as global trade picks up
Risks to outlook
A prolonged drag in global recovery
Longer time for some domestic sectors to repair
damage
Households rebuild savings
Slow recovery in jobs marketSource: DOSM; SERC
Get back on track: Well positioned to recover but risks remain
4.3
-3.0
5.5
-4
-3
-2
-1
0
1
2
3
4
5
6
2019 2020E 2021F
Real GDP Growth%
30Socio-Economic Research Centre
Set improving expectations in 2H 2020
January – June (1H) 2020 July – December (2H) 2020
Bear the brunt
of MCO
Production capacity during an
initial phase of MCO
Essential sector: 40-50%
Non essential sector: 0%
Exports trashed
Great Lockdown
in major trading
partners
Supply
chain
disruptions
Cautious sentiment
Jobs and
income
losses
Spent only
on basic
necessities
CMCO – RMCO
Allow economic sectors
to restart in stages
since May
PRIHATIN measures
provide a temporary
relief
Positive carry
through effect
from reopening
& PENJANA
Gradual
restoration of
confidence
Consumers
adjusting to
new normal
Easing pace of
retrenchment
Cash Flow
Costs Credit
Businesses
slowly
recouping
revenue loss
Domestic
tourism and
inbound travel
revive
Lagged impact
of interest rate
cuts
Exports pick up
gradually
31Socio-Economic Research Centre
Source: BNM; DOSM; SERC
The duration and depth of economic recession and recovery
6.1
-1.5
-5.9
-10.2 -11.2
-1.0
4.8
9.1
4Q97 1Q98 2Q98 3Q98 4Q98 1Q99 2Q99 3Q99
1997-1998
Asian Financial Crisis (AFC)
6.96.3
5.9
4.6
6.5
8.2
4Q02 1Q03 2Q03 3Q03 4Q03 1Q04
2003
Severe Acute Respiratory Syndrome (SARS)
5.1
0.3
-5.8-3.7
-1.1
4.5
10.3
3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10
2008-2009
Global Financial Crisis (GFC)
4.4 3.6
0.7
-11.5
-3.4
2.24.0
3Q19 4Q19 1Q20 2Q20E 3Q20E 4Q20E 1Q21E
2020
Coronavirus Disease 2019 (COVID-19)
1998 (-7.4%)
1999 (+6.1%)
2003: (+5.8%)
2004: (+6.8%)
2009 (-1.5%)
2010 (+7.4%)
2020E (-3.0%)
2021F (+5.5%)
32Socio-Economic Research Centre
4.3
-10.2
2.9
8.7
0.6
6.9 7.1
1.5
-15
-10
-5
0
5
10
15
Private Consumption Growth(%, YoY)
1997-1998
Asian Financial Crisis (AFC)
2008-2009
Global Financial Crisis (GFC)
2020 COVID-19-induced
Global Recession
Source: DOSM; BNM; SERC
1997 2008 2005-2017
(Average)
2020201020091999
1998
Currency Crisis inducedMassive income and wealth destruction
(bust in stock and property markets)
US Subprime Crisis induced Global Financial Crisis
Health Pandemic inflicted Global Recession
Unemployment rate Retrenchment Unemployment rate Retrenchment Unemployment rate Retrenchment
2.9% 4.5% 3.0% 4.0% 3.3%5.5%-
6.5%
Mar 1998 Mar 1999 Dec 2007 Mar 2009 Dec 2019 Est. 20201997 1998 2008 2009 As of 4 Jul
18,863
83,865
16,46925,064
53.952(EIS data)
BNM intervention
rate reduced from as at
end-Feb 1998
as at
end-Aug 1999
toOPR reduced
from as at
end-Mar 2019
as of
Jul 2020
toOPR reduced
from as at
end-Oct 2008
as at
end-Feb 2009
to
3-pt reduction in employees’
EPF contribution rate
Cash
handout
4-pt reduction in employees’
EPF contribution rate
Cash
handout
EPF withdrawal
Loans moratorium
Permanent demand destruction vs. spending shifts vs.
spending declines
33Socio-Economic Research Centre
79.8
66.0
175
.1
124
.2
125
.5
75.0
31.5
38.8 6
4.6 80.1
82.4
44.0
0
50
100
150
200
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020E
RM bnDomestic Direct Investment (DDI) Foreign Direct Investment (FDI)
18.4
9.5
21.4
12.811.1
6.34.5
9.0
4.31.5
-11.4
12.3 12.814.7 15.9 16.6 16.8 16.8 17.4 17.3 16.8 15.4
-15
-10
-5
0
5
10
15
20
25
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020E
Private Investment Growth
Private Investment (shareof GDP)
%
Note: Figure in parenthesis indicates changes of investment amount on year-on-year basis.
Source: DOSM; MIDA; SERC
Private investment has been trending down in recent years
34Socio-Economic Research Centre
Source: DOSM; BNM; SERC
1.2
18.8
7.3
-1.7-11.2
-16
-12
-8
-4
0
4
8
12
16
20
24
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020E(SERC)
%
Exports shrank by 9.7% yoy in Jan-May 2020 and
are expected to decline further by 11.2% in 2020
Exports performance of key products
in Jan-May 2020
Current account surplus is expected to narrow
further to 1.0%-2.0% of GDP in 2020
Major export products RM billion % Growth
E&E products [36.5%] 133.8 -13.0
Petroleum product [7.8%] 28.7 -1.4
Chemical and related products [5.7%] 20.9 -12.0
Palm oil & palm-based products [4.9%] 17.9 -1.0
LNG [4.3%] 15.6 -16.6
Optical & scientific equipment [3.9%] 14.4 -4.7
Machinery, equipment and parts [3.9%] 14.3 -16.5
Manufactures of metal [3.6%] 13.2 -23.1
Crude petroleum [2.2%] 8.2 -26.4
83.194.3 101.5
114.7
-53.2 -56.0-70.9 -64.9
2.4% 2.8% 2.1%3.3%
-9%
-6%
-3%
0%
3%
6%
9%
12%
15%
-90
-60
-30
0
30
60
90
120
150
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020F
Current Account Balance Goods & Services Balance Primary & Secondary Income Balance CA/GDP Ratio (RHS)
RM billion
1.0%-
2.0%
Figure in parenthesis indicates % share of gross exports in Jan-May 2020
Import compression helps to keep current account surplus
35Socio-Economic Research Centre
4.5
-9.3
-25.4
-30.6
-33.0
-50
-40
-30
-20
-10
0
10
20
30
Jan Feb Mar Apr May
China US Europe ASEAN Japan
YoY %
Source: DOSM
Only China offers the bright spot for now
2020
Malaysia’s exports growth to major markets
36Socio-Economic Research Centre
Is there a risk of sustained deflation?
1.75
-2.9-3
-2
-1
0
1
2
3
4
5
6
Jan2016
Jul Jan2017
Jul Jan2018
Jul Jan2019
Jul Jan2020
Jul
%
OPR Inflation Rate
Lower oil prices-induced deflation in 2020 Ringgit outlook: RM4.30 per US dollar at end-
2020
Source: DOSM; BNM
* OPR as at end-period
-6.1%
-18.6%
-4.3%
10.4%
-1.8%
1.1%
-4.4%
3.4950
4.2920
4.4860
4.0620
4.1385
4.0925
4.2800
2014 2015 2016 2017 2018 2019 30 Jun2020
Change from previous end-year's rate RM/US$
Year 2016 2017 2018 2019 2020E^
OPR (%)* 3.00 3.00 3.25 3.00 1.75
Inflation
Rate (%)2.1 3.7 1.0 0.7
-0.5 to
-1.0
Note: Exchange rate (12:00 rate) as at end-period
• Prices have slipped into deflation territory (-2.9% yoy in Apr-May and -0.2% in March) and
average -0.7% in Jan-May 2020. Transport prices were the distortionary factor due to the tumbling
petrol prices.
• 27.3% of goods in the CPI basket saw decreases in prices in Jan-May 2020.
^ denotes SERC’s estimates
(May)
37Socio-Economic Research Centre
Revenue enhancement
Additional non tax revenue,
including higher dividend
contributions from the
GLCs and CLICs such as
PETRONAS, KHAZANAH,
Bank Negara Malaysia, etc.
Reintroduction of Goods
and Services Tax (GST)?
Privatisation of some
government-owned assets
Expenditure rationalisation
More targeted subsidy;
savings from fuel subsidy
Reprioritisation and
reallocation of expenditure
Shortfall in government
spending due to MCO
-6.7
-5.3
-4.7
-2.9
-3.7-3.4
-8
-7
-6
-5
-4
-3
-2
-1
0
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020E
Fiscal Deficit% to GDP
-5.8 to
-6.0
Fiscal deficit is expected to
widen to 5.8% to 6.0% of GDP
in 2020
Review statutory debt limit;
self-imposed administrative
55% of GDP ceiling?
Sovereign ratings
S&P: A- (Negative)
Moody’s: A3 (Stable)
Fitch: A- (Negative)
Source: BNM; MOF; S&P; Moody’s; Fitch
Fiscal deficit may not matter much in an economic recession
362
793
824
50.8
49.6
53.6
50.0
52.5
58.8
48
50
52
54
56
58
60
300
400
500
600
700
800
900
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
1Q
202
0
FG Debt (LHS) FG Debt / GDP (RHS)
Federal Government Debt
RM billion % to GDP
38Socio-Economic Research Centre
Rating agencies downgrade Malaysia’ sovereign ratings
Last revision: 26 June 2020
Rating:
A- (maintained)
Outlook:
Negative (from Positive)
Last revision: 1 June 2020
Rating:
A3 (maintained)
Outlook:
Stable (maintained)
Last revision: 9 April 2020
Rating:
A- (maintained)
Outlook:
Negative (from Positive)
Comments:
• Downside risks to fiscal metrics – weak global
economic climate and heightened policy uncertainty
• Covid-19, depressed oil prices and fiscal stimulus –
weaken government’s debt position over next
few years
Comments:
• Malaysia balances its diverse economy with robust
growth potential and large domestic savings against
the government's narrow revenue base and high
debt burden
Comments:
• High uncertainty about economic deterioration
and public finances
• Recent political volatility may affect governance
standards, which had been improving in the past
two years
39Socio-Economic Research Centre
• Federal Government debt stood at RM823.8 billion (estimated 58.8% of GDP) as at end-Mar 2020, has
exceeded self-imposed administrative limit of 55% of GDP.
• It is required to seek Parliament’s approval to relax these binding fiscal limits.
No compromise on fiscal discipline and governance
Source: MOF
Debt-to-GDP ratio should not
be a cause for alarm for now
60.1%-93.1% in 1982-1991
60% is considered as a
prudential limit
Balance between higher debt
binding limit and erosion of
fiscal credibility
Committed to lower fiscal deficit to 4% of
GDP in 3-4 years
Find the right path between budget deficit (or
fiscal stimulus) and sustainable debt level
during the good times and stable years
Macro-economic and political stability
Debt service charges (DSC)
have been growing rapidly by
8.6% pa from RM15.6 billion in
2010 to RM32.9 billion in 2019,
made up 12.5% of total revenue /
operating expenditure.
However, the growing
mountain of debt should
be viewed seriouslyResume fiscal consolidation when the economy recovers
40
Political stability is key to
macroeconomic stability and growth
Good sense and strong political will
must prevail to reset our national
development agenda
Rebooting Malaysia
41Socio-Economic Research Centre
Malaysia has adopted six approaches or 6Rs (RESOLVE, RESILIENCE,
RESTART, RECOVERY, REVITALISE AND REFORM) to balance between the
COVID-19 containment and people livelihood as well as the economy.
What to watch in 2020-2021?
Aug 2020 (tentative) – Economic Recovery Plan
Sep 2020 (tentative) – 4th Malaysia Industrial Master Plan (2021-2030)
6 Nov 2020 – 2021 National Budget
Jan 2021 – 12th Malaysia Plan (2021-2025)
We Are Here
RESTARTRESILIENCE RECOVERYRESOLVE REVITALISE REFORM
Malaysia’s six-pronged strategy to address COVID-19 impact
42Socio-Economic Research Centre
• Broader stimulus. RM295.0 billion or 21.1% of GDP fiscal, monetary and micro-financial
measures to blunt the amplification of economic damages on households and businesses
(targeted) in the immediate-and short-term.
• In the immediate-term, there is pressure to reduce unemployment, revive consumer
spending and stimulate economic growth. Address investors’ lingering concerns about
domestic political environment and future policy direction. The immediate priorities are to:
1. RESTORE CONFIDENCE ON ECONOMY AND POLITICAL STABILITY
2. SWIFTLY IMPLEMENT TARGETED FISCAL SPENDING
3. EASE COST OF DOING BUSINESS
4. HOLISTIC MANAGEMENT OF FOREIGN WORKERS
5. SUSTAIN PRIVATE CONSUMPTION; EASE UNEMPLOYMENT
6. REVITALISE PRIVATE INVESTMENT (DDI and FDI)
7. DIGITALISATION AND AUTOMATION
8. RESKILLING AND UPSKILLING WORKFORCE
9. UPLIFT EXPORTS CAPACITY
10. REJUVENATE CONSTRUCTION AND SLUGGISH PROPERTY SECTOR
10-pin policy priorities in the immediate- and short-term
43Socio-Economic Research Centre
Rebooting Malaysia: Recovery, Revitalise and Reform
The Government must continue
to implement:
Malaysia’s institutional quality must
be strengthened further with
Credible economic
policies
Institutional and political
reforms
Including fiscal discipline, political
stability and institutional quality
A wider
implementation of
open and
competitive
tender
Fiscal
transparency
Strengthen
goverance
To promote accountability and fiscal responsibility
Malaysia’s Economic Recovery Plan (ERP) in the medium- and long-term will constitute
FIVE key pillars as follows:
FISCAL STABILITY AND GROWTH STABILISATION PACT
UNLOCKING NEW SOURCES OF GROWTH
REINFORCE COMPETITIVENESS AND PRODUCTIVITY NEXUS
SMART AND DIGITAL TECHNOLOGY-DRIVEN INVESTMENT
UPSKILLING WORKFORCE AND EDUCATION FOR THE FUTURE
44Socio-Economic Research Centre
Rebooting Malaysia: Recovery, Revitalise and Reform (cont.)
Corporate Tax Rate
from current’s
Review and upgrade:
Domestic Investment
Strategic Fund (DISF)
Industry4WRD
Intervention Fund
Reinvestment Allowance
Accelerated Capital Allowance
Investment Tax Allowance
Automation Capital Allowance
Ordinary
24%
SME
17%*
2%
* For first RM500,000 chargeable income
FDI (40%) = DDI (60%)
Equal emphasis
Ease cost of
doing
business
Enhance business
friendly and competitive
place of doing business
and investing
DDI = Domestic Direct Investment
:
Avoid policy flip-flops as it hurts
businesses and worrying investors.
RM207.9bn
approved in
2019
Policy continuity and meaningful
reforms should take priority to shore up
confidence and economic sustainability.
Restore consumer and investor
confidence on the economy and political
stability.
Macro and political stability are essential
to ensure a sustained economic revival.
45Socio-Economic Research Centre
Rebooting Malaysia: Recovery, Revitalise and Reform (cont.)
Investing in “new smart infrastructure”
used for high-tech, digitalisation and
sustainable purposes (renewable energy,
climate change, eco-green)
Big data centres 5G infrastructure
Charging stations for new
energy vehicles (NEVs)
Solar energy Healthcare
Medical devices
Defense
technology
Aerospace
For example:
Digitalisation and e-Commerce
RM21.0 billion National
Fiberisation and Connectivity
Plan (NFCP) (2019-2023)
Industry4WRD Plan (2018-2025)
Malaysia’s Digitalisation Plan
Malaysia’s National e-commerce
Strategic Roadmap
Smart agriculture – Food – Halal industry
Rubber products, palm oil
and oil palm products and
wood-based products
社会经济研究中心
SOCIO-ECONOMIC
RESEARCH CENTRE
谢 谢THANK YOU
Address : 6th Floor, Wisma Chinese Chamber,258, Jalan Ampang, 50450 Kuala Lumpur, Malaysia.
Tel : 603 - 4260 3116 / 3119
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