Business

3.1% GDP decline expected for Q4 2020, full-year slide at 5.7%

Experts project economic recovery this year on the back of robust exports, vaccine roll-outs, higher commodity prices

Updated 5 years ago · Published on 11 Feb 2021 9:00AM

3.1% GDP decline expected for Q4 2020, full-year slide at 5.7% — Bank Negara is expected to announce the country’s 2020 GDP figures tomorrow. – File pic, February 11, 2020

by Zaidi Isham

KUALA LUMPUR – Malaysia’s economy in 2020 is expected to register a gross domestic product (GDP) decline of 5.7% – adding up to a third consecutive quarter of contractions – as the pandemic continues to decimate local businesses and crimp consumer demand.

Economists said GDP for the fourth quarter (Q4) will post a 3.1% decrease, a bigger drop than the 2.7% decline recorded in Q3.

However, they also said the economy is expected to rebound this year, riding on robust exports, Covid-19 vaccine roll-outs, and higher commodity prices.

Bank Islam chief economist Mohd Afzanizam Abdul Rashid told The Vibes: “I believe Malaysia’s full 2020 GDP growth will be at -5.5% due to massive output losses, especially in Q2.

“Furthermore, there was a slew of factory closures in November and December 2020, from rubber glovemakers to electronic manufacturing services providers, after Covid-19 cases were discovered among factory workers.

“However, the manufacturing sector is likely to be a cushion for a further drop in economic growth in Q4 2020.”

Bank Islam chief economist Mohd Afzanizam Abdul Rashid believes Malaysia’s full 2020 GDP growth will be at -5.5% due to massive output losses, especially in Q2. – File pic, February 11, 2021

He added that other headwinds include lower retail and wholesale trade, which extended the economy’s third consecutive quarterly drop into Q4 despite the boom in online shopping.

Bank Negara Malaysia is expected to announce the country’s 2020 GDP tomorrow. For reference, Malaysia registered a growth of 4.3% in 2019.

Assoc Prof Ahmed Razman Abdul Latiff of Putra Business School expects the Q4 GDP to post a shrinkage of 2.8% to 3.1%, and the full 2020 GDP to see a decline of 4.5% to 5%.

“As for the 2021 GDP, I will stick to the government’s projection of between 6.5% and 7.5% positive growth, possibly boosted by recovery efforts by Putrajaya and vaccine roll-outs.

“Even though the retail and wholesale sectors registered a decline in December, other sectors showed an increase in sales value, such as the 7.4% gain in the motor vehicle industry.”

Assoc Prof Ahmed Razman Abdul Latiff agrees with the government’s projection of between 6.5% and 7.5% positive growth for this year’s GDP. – File pic, February 11, 2021

He added that the services sector’s total revenue in Q4 stood at RM435.9 billion – a 1.7% increase from the previous quarter.

RAM Ratings Services Malaysia Bhd on Tuesday said the Q4 GDP is expected to record a 2.8% contraction, leading to a full decline of 5.4% in 2020. – The Vibes, February 11, 2021