KUALA LUMPUR (Feb 3): Malaysia’s diversified export market serves as a huge advantage for the country in minimising the impact of slower demand expected from China, following the 2019 novel coronavirus outbreak.
Sunway University Business School Economics Professor Dr Yeah Kim Leng said all trading countries including Malaysia, would surely feel the pinch but the impact would be at a different level, given China’s big exposure to the global trade.
“Although China is Malaysia’s largest trading partner, our exports to other countries such as the United States and European nations are still at the same growth (rate). Our diversified export (market) will help cushion the impact,” he told Bernama.
In 2018, China exported US$1.71 trillion (US$1=RM4.09) and imported US$1.97 trillion in goods to the global market.
Yeah said the previous epidemics in China had been contained successfully and had minimal impact on the economy, except for severe acute respiratory syndrome (SARS) which had affected its gross domestic product by between 0.1% and 0.2%.
He said the current infection rate of coronavirus has actually reached the same scale of previous SARS, thus creating concerns that it might take some time for the Chinese government to contain the spread of the outbreak.
As at this news report, there were 17,389 confirmed cases, of which 17,206 are in China. Total recovery cases stood at 487, while death at 362. Malaysia has eight confirmed cases, all of which are Chinese nationals.
There is a risk of businesses closure, as well as shut down of (more) towns, which could curb economic activities and lead to a slowdown in the Chinese economy, he said.
Yeah said many economists already expecting up to 0.2 percentage point to be cut off from the expected growth of China’s first-quarter performance.
“At this juncture, given the strong measures taken by the Chinese government, I think the concern is more on managing the spread.
“If we can contain (the outbreak) within China, then the impact on the rest of the world is not so severe, and the global economy can still achieve the expected rise for 2020 compare to 2019,” he said.
Yeah said China might need to revise downwards its growth projection, should the outbreak prolong until the second quarter.
“If the outbreak enters the second quarter, the whole world needs to be worry,” he stressed.
China has injected US$173 billion into its economy to cushion the impact on financial markets, as it reopens after the week-long Lunar New Year holiday.
As for Malaysia, he said the government could consider introducing a fiscal stimulus package to boost the economy.
However, that should only be on the table towards the second half of the year to see how the first half has performed, he said.
“What is important is that our domestic sources are growing, infrastructure spending increases, commodities prices are firm and employment rate is stable to support domestic spending.
“If (the virus) prolongs, then the government need to spend more and relax the fiscal deficit constraint from the 3.2 per cent target for this year to maybe slightly higher of between 3.3- or 3.4 per cent to boost the domestic economy,” he said.
Last week, Finance Minister Lim Guan Eng announced that the government is evaluating the need for an economic stimulus package and is ready to launch the measures to deal with the effects of the coronavirus outbreak, if necessary.
He said it is still too early for the government to take action, as it needs to study and analyse the extent of its impact.
For now, he said it is important to focus and support the efforts and measures taken by the Ministry of Health to keep the people safe and free from the virus.
The novel coronavirus was first detected in December 2019 in Wuhan, China, causing pneumonia and symptoms such as fever, cough and breathing difficulties.
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