The central bank of Malaysia has stated the economy could contract by up to 2% or grow 0.5% in 2020 as a result of the coronavirus pandemic.

With the most cases of COVID-19 in Southeast Asia – reaching 3,100 and 50 fatalities – Malaysia is currently undergoing month-long restrictions on non-essential business and travel that have impacted trade and tourism, reports Reuters.

Bank Negara Malaysia’s (BNM) governor, Nor Shamsiah Mohd Yunus, told a virtual news conference: “We are mindful that the situation surrounding COVID-19 is highly fluid and the situation is constantly shifting.

“The GDP forecast... is our best estimate based on what we know today. Great uncertainty remains.”

However, the governor said the economy would be bolstered by the government’s stimulus measures and policy rate cuts.

She went on to add that the bank’s monetary policy stance was still accommodative and “policy levers” could be implemented to soften the blow of the impact of the pandemic. The next monetary policy meeting is scheduled on 5th May.

Bank Negara Malaysia’s exports of goods and services could fall 8.7% in 2020 as clients are hit by the pandemic. Last year exports declined 0.8%.

The last time Malaysia reported economic growth below zero was in 2009. In 2019, the economy grew 4.3%.

According to a World Bank forecast, Malaysia’s economy would shrink 0.1% this year.

BNM added that inflation was forecast between 1.5% and 0.5% this year, under the 2019 figure of 0.7%.

The bank said liquidity in the forex, bond and money markets would continue to be supported by monetary options: “The bank will ensure uninterrupted financial intermediation in the environment of heightened financial market volatility.”

In addition, index provider FTSE Russell has given Malaysia a further six months to enhance market conditions to remain in the World Government Bond Index.

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