Malaysia saw its gross domestic product (GDP) contract 4.5% year-on-year during the third quarter of 2021 (Q3 2021), primarily due to the restrictive movement control orders implemented by the government since June to curb the COVID-19 infections.
The contraction comes after the economy expanded 16.1% year-on-year during the second quarter, reported Free Malaysia Today (FMT).
On a quarterly basis, Malaysia’s GDP slid 3.6%, which was again due to the economic slowdown caused by the lockdowns.
Despite the decline, Bank Negara Malaysia (BNM) Governor Datuk Nor Shamsiah Mohd Yunus believes the country remains on track to achieve its earlier projection of 3% to 4% growth for this year.
The central bank expects the economy to grow further next year, with its projection at 5.5% to 6.5%.
“Malaysia’s growth trajectory is expected to improve given resumption of economic activities, further improvement in the labour market, continued policy support, and expansion in external demand,” said Nor Shamsiah as quoted by FMT.
“I know a lot of people are saying that the economy is facing a stagnation, but let me emphasise here that this is not the case. Growth will accelerate to 5.5-6.5% next year, and we are not seeing indications of broad-based price increases or excessive wage pressures.”
She explained that various factors are at play, such as the global vaccination programmes’ success and the stability of the country’s health situation.
“Potential risks, however, include the emergence of more threatening COVID-19 variants, continued supply chain disruptions and any worsening in the local COVID-19 outlook,” she said.
Households and businesses will be supported on the road to recovery by the government’s various initiatives like new financing options and those designed to improve digitisation in firms as well as reduced EPF deductions and targeted cash aids.
All major sectors in Malaysia registered a slowdown, with construction being the most affected, dropping 20.6% year-on-year in Q3 2021. And while the manufacturing sector fare best, it still failed to avoid a contraction, falling 0.8% during the quarter under review.
BNM also underscored that the labour market witnessed a gradual but consistent improvement during the third quarter, with unemployment rate at 4.5% as of September or its lowest level for this year.
With this, a decline in the number of unemployment claims made through the Employee Insurance System (EIS) was also observed, at around 4,300 claims. Of these, about 1,400 claims came from tourism-related businesses.