The Malaysian government will today unveil a $3.5 billion stimulus package in response to the negative economic shocks precipitated by
The Malaysian government will today unveil a $3.5 billion stimulus package in response to the negative economic shocks precipitated by the spread of the coronavirus and the US-China trade war.
In 2019, Malaysia reported its lowest economic growth in a decade, largely due to lower export volume of natural gas and oil to China, the country’s largest trading partner. The coronavirus outbreak has further reduced energy demand and regional tourism. In addition, Malaysia’s political instability—accentuated by the recent unexpected resignation of Prime Minister Mahathir Mohamad—has warded off many foreign investors.
The fiscal injection is intended to spur domestic consumption by temporarily reducing taxes and establishing a moratorium on loan repayments. The Central Bank of Malaysia is also expected to cut interest rates next month.
While the spending package will likely help curb the ill effects of the coronavirus on Malaysia’s domestic economy by boosting private consumption and keeping many small-to-medium businesses afloat, it is unlikely to impact international factors, such as demand for fuel and tourism from China and Southeast Asia. These sectors constitute a significant portion of Malaysian GDP, and an acceleration of the coronavirus’ spread could entail further instability. Even if Malaysia’s economy does recover quickly, expect cautious behaviour from investors in the medium term.
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