Malaysia still on track to solid GDP rebound: Bank Negara governor

KUALA LUMPUR: Malaysia’s economy remains on track to expand within 6.0-7.5 per cent this year, Bank Negara Malaysia governor Datuk Nor Shamsiah Mohd Yunus said.

She said despite the recent re-imposition of containment measures, the impact on growth was expected to be less severe than that experienced in 2020, as almost all economic sectors are allowed to operate.

Malaysia’s gross domestic product (GDP) saw a smaller contraction of 0.5 per cent in the first quarter (Q1) of this year from -3.4 per cent in Q4 2020.

This was despite the imposition of the Movement Control Order 2.0 and continued closure of international borders and restrictions on inter-state travel, Nor Shamsiah said during at a virtual briefing on the GDP today.

“Overall, the growth recovery will benefit from better global demand, increased public and private sector expenditure as well as continued policy support.

“This will also be reflected in the recovery in labour market conditions, especially in the gradual improvement in hiring activity,” she added.

Some economists said they had underestimated the growth momentum of the economy in Q1.

“Even as we calculated that the degree of economic contraction in Q1 will be less pronounced than the 3.4 per cent year-on-year shrinkage seen in Q4 last year, we were too conservative,” said OCBC Bank economist Wellian Wiranto.

“Rather than contracting at 1.9 per cent y-o-y, the Q1 GDP growth came in at -0.5 per cent y-o-y, besting market expectations of -0.9 per cent y-o-y, as well. On a seasonally adjusted basis, the economy grew at a nice clip of 2.7 per cent quarter-on-quarter compared to -1.5 per cent in Q4 last year,” he added.

Wellian said the fact the economy could still perform respectably in Q1 despite the MCO back then had given OCBC Bank’s stronger hope that Q2 performance might hold up relatively well too.

“We are revising our GDP forecast upwards rather than downwards; from 5.4 per cent to 6.0 per cent for the full-year 2021 because of the encouraging momentum in consumption and exports,” he added.

Putra Business School business development manager Associate Professor Dr Ahmed Razman Abdul Latiff said the growth was a little bit below expectation as many had predicted that it would be the first quarter to register a positive growth after three consecutive quarters of contraction.

Nevertheless, he said the -0.5 per cent still showed that the recovery process was well underway following the 3.4 per cent contraction in Q4 2020.

“The reason why the growth is still negative is due to increase of daily infection cases which started to register more than 2,000 cases from January.

“This prompted the government to impose various levels of MCO which ultimately slow down such economic recovery process,” he told the New Straits Times.

Therefore, Ahmed Razman does not think Bank Negara’s growth target this year was realistic.

“Judging from the high infection cases which caused MCO 3.0 to be implemented at the moment, this will further slow down the economic growth for the rest of the year. A five to 5.5 per cent growth is more realistic for this year,” he added.

Meanwhile, Nor Shamsiah said higher production from existing and new manufacturing facilities, particularly in the electrical and electronics and primary-related sub-sectors, as well as oil and gas facilities would provide a further impetus to growth.

The rollout of the domestic Covid-19 vaccine programme will also lift sentiments and contribute towards recovery in economic activity.

Nevertheless, Nor Shamsiah said the pace of recovery would be uneven across economic sectors.

“Going forward, Malaysia is well positioned to continue benefitting from stronger global economic and trade activities.

“While the growth outlook continues to be shaped by developments surrounding the pandemic, the implementation of containment measures which are mainly aimed at curbing social activities and allow almost all economic sectors to operate, would minimise the impact on economic activity,” she said.

Source: NST