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Malaysia’s economy recorded the biggest decline since 1998

MALAYSIAN economy contracted by 3.4% in the fourth quarter of 2020 (4Q20) bringing the full-year GDP performance in 2020 to a contraction of 5.6%, the biggest decline since 7.4% in 1998.

In the third quarter of 2020, Malaysia recorded a decline of 2.7%.

The sluggish 4Q20 performance was due to the Conditional Movement Control Order (CMCO) at several states since mid-October, Chief Statistician of Malaysia Datuk Seri Dr Mohd Uzir Mahidin, said in the Bank Negara Malaysia’s 4Q20 GDP virtual briefing today.

“The restrictions on mobility, especially on inter-district and inter-state travel, weighed on economic activity during the fourth quarter.

“Nevertheless, the continued improvement in external demand provided support to growth. Consequently, except for manufacturing, all economic sectors continued to record negative growth,” he said.

On the expenditure side, moderating private consumption and public investment activities weighed on domestic demand.

On a quarter-on-quarter seasonally-adjusted basis, the economy registered a decline of 0.3% (3Q20: 18.2%).

On the outlook for this year, BNM governor Datuk Nor Shamsiah Mohd Yunus said the economy will recover given the improvement in global demand as the rollout of vaccines is expected to lift consumer and business sentiments.

She said this will boost private spending activity and support the economic recovery with some of Malaysia’s key trading partners having begun rolling out Covid-19 vaccine to the public and their growth rebound could benefit our economy.

“In addition, Malaysia’s growth prospects will also be supported by a gradual normalization in domestic economic activity, continuation of large infrastructure projects and targeted policy support from the government.

“Following positive rebound in the second half, Malaysia’s export is expected to recover to record a higher growth in 2021 supported by recovery in our trade partner such as the US and China,” she said.

Nor Shamsiah noter that the implementation of the MCO2.0 will weigh on growth but the effects would be “less severe” compared to the previous MCO in March last year.

“The growing momentum of digitalisation will lend further support to economic activity. More individuals and businesses are now embracing digital solutions to future proof their business.

“The number of merchants who sign up for ecommerce and QR payment at more than double compared to previous year,” she added.

In line with earlier assessments, the average headline inflation was at -1.2% in 2020 due mainly to the substantially lower global oil prices.

For 2021, headline inflation is projected to average higher, primarily due to higher global oil prices. Underlying inflation is expected to remain subdued amid continued spare capacity in the economy.

The outlook, however, is subject to global oil and commodity price developments.

Source: The Malaysian Reserve

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