Monsoon flood dampens Malaysia's 2015 economic growth

Malaysia GDP expected to contract 0.5 percent this year, no thanks to flood recovery spending, reduction in palm oil output.

Monsoon flood dampens Malaysia's 2015 economic growth
World Bulletin / News Desk
The worst monsoon flood to hit the East Coast of Malaysia in three decades is expected to further dampen the country's economy, adding to current woes caused by a low fuel price and the weakening Ringgit.

Research economist Alan Tan told The Anadolu Agency on Tuesday that areas primarily affected were in the agriculture sector, - mainly in palm oil output - thanks to their being fewer industrial locations in the three severely affected states, Kelantan, Terengganu and Pahang.

Most of Malaysia's industrial areas lie on its west coast.

The Affin Hwang Capital Research employee added that Malaysia's gross domestic product (GDP) is expected to contract 0.5 percent this year, no thanks to flood recovery spending and the reduction in palm oil output.

Affin Hwang expects a GDP contraction between 0.5 percent and 0.8 percent this year, and estimates 5 percent GDP growth in 2015 - at the lower-end of the official forecast by the Malaysian central bank of between 5 percent to 6 percent - with slower growth in domestic demand and exports.

“The impact [from the flood] will definitely be there, although it will not be very significant. The annual contribution of the flood affected states to the Malaysian economy revolves around 8 percent, so the impact will not be great," he added.

“The contraction in contribution to GDP, will only due to the anticipated reduction in palm oil output and disruption in services, banking as well as retail sectors in the affected states. But the last three sectors will rebound once the situation fully improves, but impact would be there till then."

Monsoon floods are not a new phenomenon in Malaysia, where each year-end east coasters face heavy rain falls, which result in flash flooding.

This year over 250,000 people were evacuated at the peak of the disaster. Outside of the three severely hit provinces, the flood also hit Perak, Johor, Selangor and Negri Sembilan.

Economist Yeah Kim Leng told AA that the government is expected to dish out RM1 billion ($280 million) in recovery efforts, which would further drain its coffers.

“In Kelantan, the flood has severely damaged banks, which would also impact the banking sector significantly.”

He added that the flood had taken a tremendous toll on people's lives, which would slow down consumer spending in the three states.

Last Mod: 06 Ocak 2015, 15:01
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