KUALA LUMPUR – Malaysia was pushed into a recession induced by Covid-19, with a gross domestic product (GDP) contraction of 5.6% year-on-year (y-o-y) in 2020 – worse than what it experienced during the Global Financial Crisis (GFC) in 2009 (-1.5% y-o-y), but better than during the Asian Financial Crisis in 1998 (-7.4% y-o-y).
In a note today, MIDF Research said the country's economic performance was close to MIDF’s expectation of -5.5% y-o-y.
“For the fourth quarter of 2020 (Q4 2020) alone, the economy posted a higher decline at -3.4% y-o-y compared to -2.6% y-o-y in Q3 2020 – an outlier compared to other major Asean countries, which recorded continuous softer decline based on latest available data,” it said.
“Domestic demand continued to decline by 4.5% y-o-y in Q4 2020, a slight downtick compared to -4.4% y-o-y in Q3 2020. All components remained in negative territory except for government consumption, propelled by stimulus packages in response to the Covid-19 pandemic.”
The research outfit said that the manufacturing sector – which accounted for more than 20% of Malaysia’s GDP – was the only positive contributor to Q4 2020 GDP, with a 3.0% y-o-y growth mainly buoyed by solid expansion in electrical and electronics and rubber products, among others.
“We have revised 2021 GDP growth forecast to 5.4%. We foresee the economy to grow in 2021, reversing the fall observed in 2020, in line with resumption in domestic and global economic activities, as well as due to low base factor last year,” the report said.
“However, the economic performance in Q1 2021 may be throttled down by the current movement control order (MCO 2.0) in place, and also by renewed restrictions in key countries due to surging Covid-19 cases, which limit mobility and slowed demand.”
In addition, MIDF Research said it foresees a temporary setback for the labour market recovery, as some businesses may put a hold on hiring due to lower business activities during the MCO 2.0 period, which will affect income prospects.
By factoring in the restrictions in Q1 2021 in particular, the research house revised its full-year GDP growth forecast downwards to 5.4% y-o-y from 7.0% y-o-y as estimated initially, suggesting that the economy will attain a more gradual normalisation. – Bernama, February 11, 2021
