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Malaysia’s GDP to grow by high single-digit in Q2, momentum halted by new Covid-19 infections?

KUALA LUMPUR: Malaysia’s economy is expected to grow by at least high single digit in the second quarter of this year but economists warn that the momentum has been dented by new outbreaks of Covid-19.

They said the expected strong Q2 GDP came off the low base after the economy plunged 17.1 per cent in the same quarter last year.

Bank Islam chief economist Dr Mohd Afzanizam Abdul Rashid said Malaysia’s GDP could face the same situation as Singapore whereby it might record higher growth numbers in Q2 simply because of the low base factor.

Singapore’s economy lost momentum in Q2 after battling new outbreaks of Covid-19 but still expanded at its fastest annual pace in 11 years.

The country’s economy grew 14.3 per cent in Q2 from a year earlier, the Ministry of Trade and Industry said in a statement.

But compared with the previous quarter, the economy contracted 2.0 per cent, the ministry added.

“In reality, the economy is just about to recover but now it has been dented following the prevalence of the new Covid-19 variant i.e the Delta variant.

“This has resulted lockdown being reimplemented in various jurisdictions including us in Malaysia. So in a nutshell, we should not be overly joy given the sharp rise in the GDP growth rate during Q2,” Afzanizam told the New Straits Times.

The underlying strength of the economy was still weak as reflected by the elevated level in jobless rate, he added.

“More importantly, the sustainable recovery will be heavily reliant on the the pace of the reopening of the economy. This will hinge upon on how soon a country could reach the herd immunity,” Afzanizam said.

Sunway University economic professor Dr Yeah Kim Leng said while possible to mirror Singapore’s double-digit growth performance in Q2, the likelihood for Malaysia had been dampened by the virus resurgence and second nationwide lockdown since June 1.

“The positive growth will likely be driven by external demand led by an improving global economy while domestic demand particularly private consumption and private investment continued to be weighed down by lockdown and inability to contain the pandemic.

“The positive effects of the ramped up vaccinations on the economy will only be felt in Q3 and Q4, based on the assumption the more infectious new variants will be sufficiently contained to allow for a gradual reopening of all sector of the economy,” Yeah added.

Putra Business School associate professor Dr Ahmed Razman Abdul Latif expects Malaysia’s Q2 GDP growth to be around three to four per cent due to encouraging export data in the first half of the year.

“I do not think Malaysia will achieve a double-digit growth like Singapore because Singapore did not experience several spikes of daily infection cases like Malaysia, which forced the closing down of some economic sectors and restricted the movement between states.

“If we remain in Phase One of National Recovery Plan for the next couple of months, the Q3 GDP growth will be stagnating as well,” he said.

Bank Negara is expected to announce the Q2 numbers on August 13.

Malaysia’s economy contracted 0.5 per cent in Q1 of 2021 from a 3.4 per cent contraction in Q4 of 2020.

Source: NST