MALAYSIA’S economy contracted by -3.4% (3Q 2020: -2.6%) in the final quarter of 2020 largely due to the imposition of the conditional movement control order (CMCO) on a number of states since October last year.
For the whole year, the Malaysia economy contracted by 5.6% in 2020 which is attributable to restrictions on mobility, especially on inter-district and inter-state travel which weighed on economic activity during the fourth quarter, according to Bank Negara Malaysia (BNM).
However, the central bank noted that the continued improvement in external demand provided support to growth. Consequently, apart from manufacturing, all economic sectors continued to record negative growth.
“On the expenditure side, moderating private consumption and public investment activities weighed on domestic demand,” noted BNM.
“On a quarter-on-quarter seasonally-adjusted basis, the economy registered a decline of 0.3% (3Q 2020: 18.2%).”
On inflation, BNM said it declined to -1.5% last quarter, partly reflecting the larger decline in retail fuel prices compared to the same period last year.
A rosier 2021?
In terms of financing conditions, BNM said net financing to the private sector continued to expand at 4.4% on an annual basis.
Total outstanding loans grew by 3.7% (3Q 2020: 4.7%) due to continued growth in the household and business segments.
“Total loan disbursements to both businesses and household soared during the quarter. Business loan repayments also spiked with its growth outpacing that of disbursements. Loan demand remained forthcoming especially in the household segment,” BNM remarked.
On a general note, BNM projected the Malaysian economy to recover this year, buoyed by external demand and measures put in place under Budget 2021.
It opined that while near-term growth this year will be hampered by re-imposition of the movement control order (MCO 2.0), the impact will be less severe than last year.
“The growth trajectory is projected to improve from the second quarter onwards. The improvement will be driven by the recovery in global demand, where the International Monetary Fund (IMF) has revised upwards its 2021 global growth forecast by 0.3 percentage points to 5.5%,” noted BNM.
The central bank further expects Malaysia’s gross domestic product (GDP) growth to be supported by a turnaround in public and private sector expenditure amid continued support from policy measures including Penjana, Kita Prihatin, Budget 2021 and PERMAI.
“Higher production from existing and new facilities in the manufacturing and mining sectors, and the vaccine roll-out commencing this month is also expected to lift sentiments,” added BNM. – Feb 11, 2021
