KUALA LUMPUR, 13 May 2020 – In a statement today, Bank Negara Malaysia (BNM) said that Malaysia’s economy moderated sharply to 0.7% in the first quarter of 2020 (4Q 2019: 3.6%). On the supply side, the services and manufacturing sectors moderated while the other sectors contracted.
The central bank noted that external demand and investments declined, while private consumption growth moderated while on a quarter-on-quarter seasonally-adjusted basis, the economy contracted by 2.0%.
The moderation reflected the impact of measures taken both globally and domestically to contain the spread of the COVID-19 pandemic. Domestically, it mainly reflected the implementation of the Movement Control Order (MCO).
“After a steady expansion in the first two months of the quarter, economic activity came to a sharp downshift with the implementation of the MCO on 18 March 2020. Movement restrictions including international and domestic travel restrictions, limited work and operating hours and mandatory social distancing significantly curtailed economic activity,” BNM said.
The central bank further noted that during the quarter, headline inflation remained modest at 0.9%, mainly reflecting the lapse in the remaining impact from Sales and Services Tax (SST) implementation and lower price-volatile inflation. Core inflation moderated slightly to 1.3%.
“Net financing expanded at a sustained pace of 4.7% on an annual basis, supported by higher growth in outstanding loans. Growth in outstanding business loans increased, while outstanding household loan growth declined. Nonetheless, demand for both business and household loans slowed in comparison to the previous quarter,” it said.
Since the Special Relief Facility (SRF) was made available on 6 March, BNM said that it had worked with the participating financial institutions (PFIs) to implement the SRF, to ensure that SMEs benefit quickly.
As at 4 May 2020, the PFIs have approved more than 20,000 applications amounting to about RM10 billion. BNM stated that demand has been overwhelming, and as a result, the earlier announced RM5 billion SRF allocation has been quickly taken up that will directly benefit more than 9,000 SMEs across Malaysia, and preserve more than 200,000 jobs.
“In view of the strong demand, BNM has upsized the SRF by another RM5 billion to cater for all of the applications approved by PFIs as at 4 May bringing the total final allocation to RM10 billion.
“With the gradual lifting of the MCO and reopening of the economic sectors, SMEs can also avail themselves to the existing financing schemes offered by the Government, the financial institutions, as well as from the remaining allocation for BNM’s Fund for SMEs,” it said.
The central bank noted that in the first quarter of 2020, financial institutions have collectively disbursed RM62 billion financing to SMEs, of which RM48 billion for working capital purposes.