KUALA LUMPUR – The World Bank has lowered Malaysia’s economic growth forecast this year to -4.9% after a sharper than expected contraction in the second quarter.
The revised forecast of -4.9% is down from an early estimate of -3.1%.
In a statement today, the World Bank said the revised forecast reflects the heightened uncertainty on the rate of the global economic recovery that is weighing on investment decisions and external demand.
The elevated unemployment rate and other weaknesses in the labour market also continue to weigh on private consumption, it added.
After the economy-wide temporary closures and reduced business operations, the World Bank said the labour market is significantly impacted, with unemployment rising to 5.1% in Q2, its highest rate in 30 years.
Labour force participation had declined to 68.1% in Q2 from 68.8% the last quarter.
“Reflecting these developments, most demand components, such as net exports, private consumption and private investment are expected to contract in 2020,” the World Bank said following the launch of its Economic Update report for East Asia and the Pacific.
Malaysia’s economy is severely affected by the Covid-19 pandemic, leading to a double-digit contraction of 17.1% in Q2, mainly driven by a decline in domestic demand due to the imposition of the movement control order and weak external conditions.
Government expenditure is expected to increase, mainly due to stimulus spending, said the report.
Meanwhile, poverty at the US$5.50 per day (2011 Purchasing Power Parity dollars) upper-middle-income poverty line is projected to increase slightly to 0.9% from 0.8% this year.
The World Bank said the increase is due to higher unemployment, reduced work hours, and slower business for small and medium enterprises (SMEs), although these contractionary effects have been offset to some degree by government relief and recovery measures.
“The US$5.50 per day 2011 PPP poverty rate is projected to decline to 0.6% in 2021 and 0.5% in 2022. – Bernama, September 29, 2020
