Skip to content
  • Group
    • About MARC
    • Leadership
    • Investor Relations
    • Notable Issuances
    • MARC Ratings
    • MARC Solutions
    • MARC Data
    • MARC Learning
    • Careers
  • Services
    • Credit Ratings & Related Assessments
    • Sustainability-Related Assessments
    • Economic & Fixed-Income Analysis
    • Sustainability-Related Advisory
    • Debt Advisory
    • Analytics Consulting Services
    • Subscriptions
    • Data Analytics
    • Credit Reporting
    • Learning Programmes
  • Insights
    • Rating Announcements
    • Research & Analysis
    • Views
    • MARC in the Media
    • Newsfeed
    • Latest@MARC
  • Events & CSR
  • Contact Us
    • Contact Us
    • Service Level Feedback Form
    • Publication Feedback Form
    • Whistleblowing
Menu
  • Group
    • About MARC
    • Leadership
    • Investor Relations
    • Notable Issuances
    • MARC Ratings
    • MARC Solutions
    • MARC Data
    • MARC Learning
    • Careers
  • Services
    • Credit Ratings & Related Assessments
    • Sustainability-Related Assessments
    • Economic & Fixed-Income Analysis
    • Sustainability-Related Advisory
    • Debt Advisory
    • Analytics Consulting Services
    • Subscriptions
    • Data Analytics
    • Credit Reporting
    • Learning Programmes
  • Insights
    • Rating Announcements
    • Research & Analysis
    • Views
    • MARC in the Media
    • Newsfeed
    • Latest@MARC
  • Events & CSR
  • Contact Us
    • Contact Us
    • Service Level Feedback Form
    • Publication Feedback Form
    • Whistleblowing
  • Sign In
  • Subscribe
  • Group

    Group

    The MARC Group of Companies comprises MARC Ratings, MARC Solutions, MARC Data and MARC Learning.

    • About MARC
    • Leadership
    • Investor Relations
    • Notable Issuances
    • About MARC
    • Leadership
    • Investor Relations
    • Notable Issuances
    • MARC Ratings
    • MARC Solutions
    • MARC Data
    • MARC Learning
    • MARC Ratings
    • MARC Solutions
    • MARC Data
    • MARC Learning

    MARC Ratings

    • Rating Guide
    • Rating Process
    • Rating Symbols & Definitions
    • Rating Methodologies
    • Regulatory
    • Lead Managers

    MARC Solutions

    MARC Data

    MARC Learning

    • Careers
    • Careers
  • Services

    Services

    MARC's subsidiaries each provide distinct product offerings and services.

    • Credit Ratings & Related Assessments
    • Sustainability-Related Assessments
    • Economic & Fixed-Income Analysis
    • Credit Ratings & Related Assessments
    • Sustainability-Related Assessments
    • Economic & Fixed-Income Analysis
    • Sustainability-Related Advisory
    • Debt Advisory
    • Analytics Consulting Services
    • Sustainability-Related Advisory
    • Debt Advisory
    • Analytics Consulting Services
    • Subscriptions
    • Data Analytics
    • Credit Reporting
    • Learning Programmes
    • Subscriptions
    • Data Analytics
    • Credit Reporting
    • Learning Programmes
  • Insights

    Insights

    Find the vital information you need and stay up to date with the latest news from MARC.

    • Rating Announcements
    • Research & Analysis
    • Views
    • Rating Announcements
    • Research & Analysis
    • Views
    • MARC in the Media
    • Latest@MARC
    • MARC in the Media
    • Latest@MARC
  • Events & CSR

    Events & CSR

    MARC organises a diverse range of events throughout the year to engage with all stakeholders.

    • MARCares
    • Events
    • MARCares
    • Events
  • Contact Us

    Contact Us

    Let's get the conversation started - Get in touch with us!

    • Contact Us
    • Service Level Feedback Form
    • Publication Feedback Form
    • Whistleblowing
    • Contact Us
    • Service Level Feedback Form
    • Publication Feedback Form
    • Whistleblowing
MARC Online
Subscribe
Menu
  • Group
  • Services
  • Insights
  • Events & CSR
  • Contact Us
Menu
  • Group
  • Services
  • Insights
  • Events & CSR
  • Contact Us
Credit Ratings & Related Assessments
Sustainability- Related Assessments
Economic & Fixed-Income Analysis
Subscriptions
Sustainability- Related Advisory
Debt Advisory
Analytics Consulting Services
Data Analytics
Credit Reporting
Learning Programme

Credit Ratings & Related Assessments

Sustainability- Related Assessments

Economic & Fixed-Income Analysis

Subscriptions

Sustainability- Related Advisory

Corporate & Debt Restructuring Advisory

Analytics Consulting Services

Data Analytics

Credit Reporting

Learning & Customised Programme

  • Insights
  • Latest@MARC
Corporate

Rising to the great economic adversity

View Reports

Contacts

Posted Date: July 8, 2020

The great economic fallout arising from the COVID-19 pandemic will lead to the deepest global output contraction since the Great Depression in the 1930s. Not surprisingly, the World Bank and the International Monetary Fund (IMF) project a contraction in real gross domestic product (GDP) by 5.2% and 4.9% for 2020. This will be followed by a relatively strong rebound in 2021.

Going forward, prospects of the global economy hinge on whether the pandemic leaves a lasting impact that could change the economy's long-term growth trajectory; investment decisions, the structure of global trade and supply chain linkages as well as the productivity of human capital.

Given the backdrop, MARC forecasts a contraction in Malaysia's real GDP of between 3.0% and 1.5% in 2020. Apart from being dented by the deterioration in external trade, Malaysia's growth pillar – private consumption – is set to moderate as consumer sentiment is affected by the rising unemployment rate which has recently surged to a 30-year high. Likewise, businesses have also been deeply affected as reflected by the persistent deterioration in business conditions in the last six consecutive quarters.

On the fiscal side, the decline in government revenue amid weaker growth prospects is exacerbated by a significant drop in global crude oil prices since late February this year. Given that oil-related revenue accounts for roughly 20% of government receipts over the past five years, we anticipate the decline in overall government revenue and the increase in expenditures to lead to a budget deficit of 6.0% to 6.5% of GDP in 2020.

Despite the sharp increase in budget deficits, MARC believes that extraordinary times call for extraordinary measures and larger budget deficits are justified to ensure businesses and consumers are well supported. The critical question, however, is whether the deficits and debt can be pared down within the targeted time frame.

Increasing budget deficits and government debt will weigh on Malaysia's sovereign credit rating. This is evidenced from the recent adjustments of Malaysia's sovereign credit rating outlook from "stable" to "negative" by two international credit rating agencies. Going forward, however, we believe that a quick and sustainable recovery in global crude oil prices and credible medium-term revenue-enhancing measures will relieve some of the pressure.

With headline inflation already in negative territory, real interest rates remain higher than historical norms. Notwithstanding this, MARC foresees a slim possibility of further Overnight Policy Rate (OPR) cuts in 2020 after BNM reduced it to a historical low of 1.75% on 7th July. We believe that further cuts in the OPR will add pressure on the banking sector's performance and result in banks becoming extra cautious in their lending activity. It will also not augur well for the ringgit, which on a year-to-date basis, has depreciated by 4.3% against the US dollar.

For 2021, MARC maintains its real GDP growth forecast of between 6.2% and 6.7% on account of the low base in 2020 as well as some recovery in private consumption and improvements in the external sector. We expect global trade recovery to push up Brent crude oil prices to an average of USD50-USD55 per barrel of oil in 2021. Studies have indicated that a USD1 increase in the price of Brent crude oil price will increase Malaysia's real GDP growth by about RM650 million and fiscal revenue by RM365 million.

Contact:

Nor Zahidi Alias, +603-2717 2936/ zahidi@marc.com.my

You May Also Like To Read

See All
Corporate

MARC embarks on corporate realignment to gear up for growth

1 December, 2022

Awards

MARC Ratings named Best Islamic Rating Agency at GIFA 2022

7 October, 2022

Events

MARC to host economic discourse

6 December, 2022

See All

Let’s get started.

Subscribe to our mailing list today

Subscribe Now
Group
  • About MARC
  • Leadership
  • Investor Relations
  • Notable Issuances
  • Careers
Regulatory
  • Rating Reviews Summary
  • List of Defaults
  • List of Credit Ratings Published
  • List of Entities on Rating Watch
Services
  • Credit Ratings & Related Assessments
  • Sustainability-Related Assessments
  • Economic & Fixed-Income Analysis
  • Sustainability-Related Advisory
  • Corporate & Debt Restructuring Advisory
  • Subscriptions
  • Analytics Consulting Services
  • Data Analytics
  • Credit Reporting
  • Learning & Customised Programmes
Subsidaries
  • MARC Ratings
  • MARC Learning
  • MARC Data
  • MARC Solutions
Insights
  • Rating Announcements
  • Research & Analysis
  • Views
  • Latest@MARC
  • MARC in the Media
Events
  • Corporate Events
  • Corporate Social Responsibility (CSR)
  • Advertise with MARC
Contact Us
  • Contact Us
  • Service Level Feedback Form
  • Publication Feedback Form
  • Whistleblowing
  • Group
    • About MARC
    • Leadership
    • Investor Relations
    • Notable Issuances
    • MARC Ratings
    • MARC Solutions
    • MARC Data
    • MARC Learning
    • Careers
  • Services
    • Credit Ratings & Related Assessments
    • Sustainability-Related Assessments
    • Economic & Fixed-Income Analysis
    • Sustainability-Related Advisory
    • Debt Advisory
    • Analytics Consulting Services
    • Subscriptions
    • Data Analytics
    • Credit Reporting
    • Learning Programmes
  • Insights
    • Rating Announcements
    • Research & Analysis
    • Views
    • MARC in the Media
    • Newsfeed
    • Latest@MARC
  • Events & CSR
  • Contact Us
    • Contact Us
    • Service Level Feedback Form
    • Publication Feedback Form
    • Whistleblowing
Terms & Conditions
Privacy Notice
Copyright Notice
Whistleblowing
PDPA Notice
© 2023 Malaysian Rating Corporation Berhad. All rights reserved.
Facebook Twitter Linkedin

Join MARC Mailing List

I would like to subscribe this mailing list. Please tick whichever is applicable

I agree/ do not agree (please tick whichever is applicable) to receive future events, conferences or marketing materials from MARC. *

Privacy Notice *

Declaration *