KUALA LUMPUR – The Malaysian Institute of Economic Research (MIER) is revising down its real GDP projection in 2020 to -5.5% amid a confluence of factors that weighed on the economy.
The think tank said the projection was based on a deep decline of economic growth in the second quarter of -17.1%, the resurgence in Covid-19 cases and the re-implementation of the conditional movement control order (CMCO), as well as the absence of additional government mitigation measures for the last quarter, especially for midsize small and medium enterprises (SMEs).
The GDP growth for the third and fourth quarters of 2020 would have been expected to register a positive growth of between 2.0% and 2.5%, largely depending on the effectiveness of the Prihatin and Penjana stimulus packages, said MIER in a statement today.
Meanwhile, unemployment is expected to remain stable from the impact of the Prihatin and Penjana stimulus packages, should the loan moratorium remain in place until year-end to support SMEs, including the larger ones in terms of employment at between 3.7% and 4.5%.
“Although the GDP growth reduced significantly in the second quarter of 2020 by -17.1%, the unemployment rate showed declining trends,” said MIER.
For 2021, MIER maintained its forecast of real GDP growth rate of 5.2-6.7%, taking into account projections from its 'Crouching Tiger Initiative' and the launch of the 12th Malaysia Plan early next year.
“But, as the flattening of the pandemic had taken six months in the first wave, we expect the flattening of this third wave to take at least the same amount of time and will delay the recovery to first quarter of 2021,” it added
While factoring in world prospects due to the pandemic for growth, trade and investment, the main downside risk to the projection for the economy remains the current surge of the pandemic, said MIER.
It noted that if the proposed national emergency to counter the new Covid-19 resurgence in the third quarter were enforced, it would have tanked the economy this year, and would further delay its recovery next year.
“While that proposal had been rejected, the pandemic remains the major downside to the speed of economic recovery in 2021, and threatens to turn a V-shaped reversal into a U-shaped one,” said MIER.
It noted that contributing to mitigation process would involve further new measures to contain the Covid-19 pandemic and the government stimulus measures, including public spending and new incentives, and investments in the private sector.
“The government must ensure a shift from a consumption and debt-driven economy to an investment- and technology-led transformation,” added MIER. – Bernama, October 26, 2020
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