RECENT data releases suggest that Malaysia’s gross domestic product (GDP) may have contracted 3.5% year-on-year (yoy) in 3Q 2021 (+16.1% yoy in 2Q 2021) after being hit by stringent COVID-19 containment measures nationwide during the July-August period.
According to CGS-CIMB Research, strict movement restrictions dealt a blow to contact-intensive services such as food & beverage (F&B) services, accommodation, distributive trade, transportation & storage as well as real estate.
“This resulted in the Index of Services – a gauge of private services performance – declining 7.5% yoy in 3Q 2021 (+17.7% yoy in 2Q 2021),” observed economist Lim Yee Ping.
“Underperformance in the agriculture sector likely extended into 3Q 2021F as persistent foreign labour shortages continued to hurt palm oil production (-10.8% yoy in 3Q 2021 vs -9.3% yoy in 2Q2021).”
The 3Q 2021 GDP data will be released tomorrow (Nov 12).
As wide COVID-19 vaccination coverage bolsters the sentiment that Malaysia’s economic re-opening is likely durable, CGS-CIMB Research noted that improvements in both the MIER consumer confidence index (102 in 3Q 2021 vs 64 in 2Q 2021) and business condition index (97 in 3Q 2021 vs 88 in 2Q 2021) hint that the recovery in domestic demand will regain momentum ahead, supported by accommodative fiscal and monetary policy.
“Already, green shoots of economic revival have emerged as the Industrial Production Index (IPI) expanded at a stronger-than-expected pace of 2.5% yoy and 4.1% mom sa in Sep, led by manufacturing index (+4.0% yoy in September vs +0.6% yoy in August) and electricity index (+0.4% yoy in September vs. -4.8% yoy in August).
Meanwhile, the mining index fell -0.5% mom and -3.0% yoy, improving from -3.8% mom and -4.2% yoy in August. Sequential gains in distributive trade index (+9.7% mom in September vs +5.8% mom in August) point to a revival in private consumption, supported by lower unemployment rate (4.5% in September vs 4.6% in August).
“Further improvements are likely on the way, with Malaysia’s manufacturing PMI (Purchasing Managers’ Index) rising to 52.2 in October, the highest reading in six months,” projected CGS-CIMB Research.
“Hence, we reiterate our GDP growth forecast of 3.9% for 2021F and 5.6% for 2022F.” – Nov 11, 2021
