With the Covid-19 pandemic shattering external demand and private consumption, Malaysia’s economy is believed to have contracted in the first quarter – its first in over a decade.
The median forecast from a survey of 12 economists was for the country’s gross domestic product to fall 1.5% year-on-year in Q1 2020, the first contraction since Q3 2009 during the global financial crisis.
Individual forecasts ranged between a 0.8% GDP growth and a 4.2% decline, reported Reuters.
Alex Holmes, Asia economist for Capital Economics, noted that Malaysia’s economy took a heavy beating from sharp downturns in external trade, tourism and global crude prices, aggravated by poor domestic activity due to the government’s curbs on businesses and movement.
“While a gradual easing of restrictions, both at home and abroad, should see activity rebound in the second half of the year, output is still likely to be much lower in 2020 than last year,” said Holmes, who expects the economy to decline 5% this year.
And while Malaysia’s statistics department had delayed the release of factory output data for March, economists predict that industrial production to have sharply dropped as most businesses and factories were ordered to cease operations in a bid to limit the spread of Covid-19.
Exports declined 4.7% in March on the back of a decline in shipments across sectors as well as trade partners.
Last month, Malaysia’s central bank had predicted the economy to either marginally grow by 0.5% or contract by up to 2% due to the pandemic, underscoring that “great uncertainty remains”.
Bank Negara Malaysia also slashed its key interest rate last week, its third consecutive cut for this year, pushing it down to a historic low of 2%.
Standard Chartered said domestic activity would be of greater concern for Southeast Asia’s third-biggest economy, as the movement control order (MCO) issued by the government had been “relatively stringent”.
It added that “the degree of uncertainty to the forecast is very high”.
“More importantly, Q2 GDP is likely to be significantly worse than Q1 as the MCO has only just been eased to conditional MCO (CMCO) beginning May 4,” it said in a note.