KUALA LUMPUR, Feb 11 — Malaysia was pushed to a recession induced by Covid-19 with a gross domestic product (GDP) contraction of 5.6 per cent year-on-year (y-o-y) in 2020, worse than what it experienced during the Global Financial Crisis (GFC) in 2009 (-1.5 per cent y-o-y) but better than during the Asian Financial Crisis in 1998 (-7.4 per cent y-o-y).

In a note today, MIDF Research said the country’s economic performance was close to MIDF’s expectation of -5.5 per cent y-o-y.

"For the fourth quarter of 2020 (Q4 2020) alone, the economy posted a higher decline at -3.4 per cent y-o-y compared to -2.6 per cent y-o-y in Q3 2020, an outlier compared to other major Asean countries which recorded continuous softer decline based on latest available data.

"Domestic demand continued to decline by 4.5 per cent y-o-y in Q4 2020, a slight downtick compared to -4.4 per cent y-o-y in Q3 2020. All components remained in negative territory except for government consumption, propelled by stimulus packages in response to the Covid-19 pandemic,” it said.

The research outfit said that the manufacturing sector, which accounted for more than 20 per cent of Malaysia’s GDP, was the only positive contributor to Q4 2020 GDP with a 3.0 per cent y-o-y growth mainly buoyed by solid expansion in electrical and electronics and rubber products, among others.

"We have revised 2021 GDP growth forecast to 5.4 per cent. We foresee the economy to grow in 2021, reversing the fall observed in 2020, in line with resumption in domestic and global economic activities and also due to low base factor last year.

"However, the economic performance in Q1 2021 maybe throttled down by current Movement Control Oder (MCO 2.0) in place and also renewed restrictions in key countries due to surging Covid-19 cases which limit mobility and slowed demand,” it said.

In addition, MIDF said it foresee a temporary setback for the labour market recovery as some businesses may hold hiring due to the lower business activities during the MCO 2.0 period which will affect income prospects.

By factoring in the restrictions in Q1 2021 in particular, the research firm revised its full-year GDP growth forecast downward to 5.4 per cent y-o-y from 7.0 per cent y-o-y as estimated initially, suggesting the economy to attain a more gradual normalisation. — Bernama