Resiliency of Malaysian Economy: External Factors

The impact of COVID-19 is a significant test on the resiliency of economy for all countries including Malaysia. Early indicator that can be used to diagnose the effect of COVID-19 towards Malaysian economy is by looking at the Gross Domestic Product (GDP). Recently, World Bank has predicted that GDP for Malaysia in 2020 will sink to 0.1% as compared to early prediction of 4.5 percent. The GDP drop at 1% indicate that the size of Malaysia economic reduce at rate 0.1%.

In the early stage, the drop was driven by the external factors especially by the decision of China government to implement lockdown to stop the spread of the COVID-19 outbreak inside their own country. This has directly given negative impact towards few important industries in Malaysia such as tourism and hospitality, manufacturing as well as transportation industry as these industries are among the prominent contributors toward GDP of this country. As we know, year 2020 is targeted as Visit Malaysia Year (VMY) to catalyst the economy growth of Malaysia and tourism industry is one of the major contributors.

China is not only one of the biggest Malaysia trade partners, but China people is also the main target (4 million visitors) to support the predicted RM100 billion revenue from the Visit Malaysia Year 2020.  Slowdown in global economic that has already occurred because of the trade war between US and China even before the outbreak of COVID-19, has further contributed to the negative growth of this country.

Economic growth is an important indicator to attract the foreign direct investment (FDI) flows.  As a country that employed open economic, Malaysia is very dependent on the FDI to drive the economic growth. The confidence of investors to bring the FDI into this country can be achieve through the positive prospect of economic growth. This shows that Malaysia GDP depends and are influenced by the external factors. Even though the government has implemented good strategy to drive the economic growth, but it is not resilient enough to withstand the impact of the external factors that can lead to the slowdown of the country’s economic growth.

As a conclusion, this shows that the external events, such as the current impact of COVID-19 outbreak, can influence Malaysian economic because it is not resilient from the external factors.