MARC: Global economy outlook turning gloomy
Global economy prospects are looking increasingly uncertain following the novel coronavirus outbreak in China and this is not surprising as the Chinese economy accounts for one-third of global growth.
Malaysian Rating Corp Bhd (MARC) said compared with the Severe Acute Respiratory Syndrome (SARS) outbreak in 2003, impact of the Wuhan outbreak would be much more significant.
The ratings agency said given the rapid increase in the number of tourists from China in recent years, the repercussions of the coronavirus outbreak on global tourism would be bigger.
“It is a critical concern in Malaysia as the tourism sector is a major foreign exchange contributor to the domestic economy,” said MARC.
The government has been expecting the Visit Malaysia Year 2020 (VMY2020) campaign to attract 30 million tourist arrivals, with tourist receipts hitting RM100 billion.
MARC said the government had targeted Chinese nationals to make up 10.6 per cent of total tourist arrivals.
Meanwhile, the services sector, which accounts for nearly 57 per cent of the economy, has remained resilient so far.
For the first nine months of last year, the sector expanded by an average 6.1 per cent and contributed 76 per cent to headline gross domestic product growth.
However, the coronavirus outbreak was slowly weighing on prospects, said MARC.
On the demand side, retail trade and accommodation are among the major beneficiaries of international tourism. The subsectors collectively constitute 15 per cent of the services sector.
Tourist expenditure would continue to be an important contributor to the economy as higher receipts could boost consumerlinked industries as well as exports of goods and services, said MARC.
“Given that tourist expenditures would likely decline this year, Malaysia’s private consumption growth would be affected.
“This would weigh on the economy as private consumption accounted for more than 50 per cent of the economy and contributed more than 90 per cent of headline growth in the first nine months of last year,” it said.