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Malaysia’s GDP shrinks 5.6 per cent in 2020, worst performance since 1998

Members of the public pose for pictures at the Saloma Link Bridge in Kuala Lumpur on the first day of Syawal May 24, 2020. — Picture by Choo Choy May. Sketched by the Pan Pacific Agency.

KUALA LUMPUR, Feb 11, 2021, ST. Malaysia’s economy declined further in the fourth quarter of 2020, leading to a worse contraction in Gross Domestic Product (GDP) than initially projected by the government, The Straits Times reported.

Department of Statistics Malaysia chief Uzir Mahidin said on Thursday (Feb 11) that Malaysia’s fourth quarter GDP fell by 3.4 per cent – bigger than the 2.7 per cent decline in the third quarter. Overall GDP shrank by 5.6 per cent, the biggest contraction since the 1998 Asian Financial Crisis.

The Finance Ministry previously said that it expected the economy to shrink by 4.5 per cent in 2020. Malaysia recorded 4.3 per cent GDP growth in 2019.

Between October and December last year, much of the country came under renewed restrictions, including travel curbs, as the government scrambled to deal with a third wave of Covid-19 infections.

Datuk Seri Uzir said that the construction, mining and services sectors posted the biggest declines last year, contracting by 19.4 per cent, 10 per cent and 5.5 per cent respectively.

The governor of Bank Negara Malaysia (BNM), the central bank, Nor Shamsiah Mohd Yunus, on Thursday said that the labour market was expected to remain weak in the first half of 2021 before improving.

The unemployment rate stood at 4.8 per cent at the end of 2020 after surpassing 5 per cent in the middle of the year, the highest rate in three decades.

Datuk Nor Shamsiah was confident, however, that the economy would recover in 2021 in line with expected vaccine rollouts and global economic recovery, although she cautioned that downside risks due to the Covid-19 situation remained.

BNM is expected to release its revised outlook for economic growth in 2021 next month. Initial projections by the Finance Ministry expect growth this year to be between 6.5 per cent to 7.5 per cent.

The central bank governor also said that targeted loan repayment assistance offered by banks were sufficient to deal with the economic impact of ongoing partial lockdowns, amid calls for a blanket loan moratorium – akin to that announced in March last year – to be re-introduced.

“It is a fallacy to assume the economy would be helped by an automatic moratorium,” Ms Nor Shamsiah said at the press briefing on Thursday.

Malaysia is currently in its third iteration of Covid-19 restrictions since the pandemic began just over a year ago.

The economy was almost entirely shut down between March and June 2020 – causing GDP to contract by a whopping 17.1 per cent in the second quarter.

A resurgence in infections saw partial curbs being introduced in October.

A one-month re-opening of the economy at the end of the year caused another surge in cases, leading to a partial lockdown being instituted in mid-January. This is scheduled to end on Feb 18.

Malaysia is under a seven-month state of emergency to deal with the pandemic.

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