Despite CMCO 2.0, BNM keeps Malaysia’s 2020 economic growth at -3.5pc to -5.5pc as restrictions less strict than MCO

BNM governor Datuk Nor Shamsiah Mohd Yunus said the central bank had already taken into account the possible increase in Covid-19 cases again when making this forecast on gross domestic product (GDP) growth rates for 2020. — Bernama pic
BNM governor Datuk Nor Shamsiah Mohd Yunus said the central bank had already taken into account the possible increase in Covid-19 cases again when making this forecast on gross domestic product (GDP) growth rates for 2020. — Bernama pic

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KUALA LUMPUR, Nov 13 — Bank Negara Malaysia (BNM) will be keeping its August forecast of Malaysia’s economy shrinking within the range of -3.5 per cent to -5.5 per cent for 2020, as the reintroduction of the conditional movement control order (CMCO) still allows for many businesses to operate unlike the stricter movement control order (MCO).

BNM governor Datuk Nor Shamsiah Mohd Yunus said the central bank had already taken into account the possible increase in Covid-19 cases again when making this forecast on gross domestic product (GDP) growth rates for 2020.

“Of course we recognise the recent implementation of containment measures to stem the resurgence of Covid-19 cases could somewhat affect our growth momentum in the final quarter of the year.

“But the current CMCO is not the same as the previous CMCO; most businesses are allowed to continue to operate. Based on this, we expect growth to remain within our projected range of -3.5 to -5.5 per cent for 2020, albeit closer to lower range, as this range has already incorporated an assumption in resurgence in Covid-19 cases,” she told the media in an online briefing today.

Noting that BNM has forewarned that the health crisis of Covid-19 would be “long drawn akin to running a marathon”, Nor Shamsiah said: “We remain confident that we will recover but there are likely to be speed bumps along the way.”

Nor Shamsiah said Bank Negara remains confident that Malaysia's economy will recover but there are likely to be speed bumps along the way. ― Picture by Firdaus Latif
Nor Shamsiah said Bank Negara remains confident that Malaysia's economy will recover but there are likely to be speed bumps along the way. ― Picture by Firdaus Latif

Pointing out that the resurgence of Covid-19 cases has made it necessary to reintroduce CMCO in Sabah and peninsula Malaysia except for three states, Nor Shamsiah however stressed that the current edition of the CMCO is less strict than the previous CMCO or the MCO.

“CMCO is not MCO. Economic activity is continuing and not stopping. Hence, while the CMCO will affect growth momentum in the final quarter of the year, the impact will be less severe than in the MCO,” she said.

She stressed that most sectors are allowed to operate under the current CMCO with sector-specific standard operating procedures (SOPs), with both customers and businesses already used to SOPs and now better prepared to adjust to the current situation.

“Policy assistance will continue to support households and companies. Finally, the ongoing recovery in external demand will help support Malaysia’s exports,” she said.

BNM had in April said Malaysia’s GDP growth rate for the entire year of 2020 is projected to be between -2.0 and 0.5 per cent, but in August revised the forecast for 2020 downwards to between -3.5 per cent and -5.5 per cent.

Other than keeping its projection of Malaysia’s GDP growth rate at between -3.5 per cent and -5.5 per cent for 2020, BNM today also said it forecasts Malaysia’s economy to rebound to a GDP growth rate of between 6.5 per cent and 7.5 per cent for 2021.

In the latest figures released today, there are also indications of Malaysia being on the track to economic recovery, with GDP growth figures for the third quarter in 2020 rebounding to -2.7 per cent, an improvement from the record low of -17.1 per cent in the second quarter of 2020.

CMCO’s economic impact less than MCO’s

Nor Shamsiah also said that the impact of the CMCO on Malaysia’s real GDP for 2020 is about half that of the MCO’s impact.

“The daily loss in real GDP from the CMCO implemented in Sabah and Peninsular Malaysia except for three states, as what I have said earlier on, is about RM0.3 billion compared to about RM0.9 billion to RM1.4 billion during the MCO from March 18 to May 3,” she said.

Nor Shamsiah today also shared that the number of online transactions in Malaysia had hit three million on November 11 during the 11.11 sales, which was well above the daily average of one million transactions.

“This tells us two things. One, the digital revolution is gaining momentum. And two, this also suggests people are still spending,” she said, having also in the same presentation pointed to improved key indicators of Malaysia being on the path to economic recovery such as a rebound in domestic credit card spending in the third quarter of 2020.

“Overall, based on current growth projections, we expect the economy to recover back to its 2019 levels next year. Of course,this is subject to the recovery in global demand and turnaround in private sector spending amid continued support from government policy measures,” she said.

CMCO impact on unemployment

Nor Shamsiah also touched on unemployment figures in Malaysia, noting that there has been an improvement from the 5.1 per cent rate in the second quarter of 2020 to a lower unemployment rate of 4.7 per cent in the third quarter.

“This is supported by the rehiring of employees as demand conditions gradually normalise post-RMCO (recovery movement control order),” she said.

Despite the Malaysian economy now showing significant improvement since its trough in April, Nor Shamsiah said the pace of recovery is expected to be uneven across different economic sectors.

“In particular, data shows high-touch segments such as consumer and tourism services have been most affected by mobility restrictions that were in place.

“So looking ahead to the fourth quarter (of 2020) and to 2021, the reimposition of CMCO in selected states from October to December is expected to induce some softness in labour market conditions.

“Therefore the retention of the wage subsidies programme and the job search allowance under the employment insurance system (EIS) by the Social Security Organisation (Socso) are timely as they will provide support to vulnerable segments of the labour market,” she added.

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