KUALA LUMPUR, Aug 14 ― Malaysia's economy contracted by 17.1 per cent in the second quarter this year as the Covid-19 pandemic took a heavy toll on exports and domestic consumption.
It is the lowest growth since the country was hit by the Asian Financial Crisis in1998.
Bank Negara Malaysia (BNM) and the Department of Statistics Malaysia (DOSM) which released the data today noted that all key sectors registering negative growths in the aftermath of the movement control order (MCO) during April and May to curb the coronavirus from spreading.
Only agriculture recorded a marginal output increase.
“The sharp decline in GDP for this quarter was due to the three phases of the movement control orders and conditional movement control order imposed to curb the spread of Covid-19 in Malaysia,” DOSM director Datuk Seri Uzir Mahidin said in a joint press conference with BNM that was “streamed live.
“The capacity constraint due to restriction imposed during the lockdown had affected growth in the services, manufacturing and construction sectors,” he added.
Significantly weak external demand conditions caused not only severe demand and supply shocks, but also production constraints across all economic sectors in a crisis that central bank governor Datuk Nor Shamsiah Mohd Yunushad said had unprecedented effects.
Marked decline in tourism activity stemming from international border closures and restricted interstate travel also contributed significantly to the contraction, the bank said.
On the supply side, nearly all economic sectors registered negative growth. The economy contracted 16.5 per cent on a quarter-on-quarter seasonally-adjusted basis.
Construction was the worst performer, contracting by 44 per cent followed by mining and quarrying at -20 per cent, manufacturing at -18 per cent, and services at -16.2 per cent.
Agriculture, the sole sector to post growth, registered a 1.0 per cent output increase.
In real GDP terms, domestic demand shrunk by -18.7 per cent compared to 4.5 per cent growth in the same period last year.
Private sector consumption posted a -18.5 per cent growth while investment contracted higher at -20.5 per cent.
Public investment and consumption contracted 38 and 2.3 per cent respectively.
Meanwhile, headline inflation in the second quarter stood at -2.6 per cent, as retail fuel prices plunged significantly and the government offered an electricity tariff rebate in a bid to assist consumers. Core inflation moderated slightly to 1.2 per cent.
Nor Shamsiah said inflationary pressure is expected to remain muted throughout the year, with broader prices showing signs of normalisation after the economy reopens.
The share of consumer price index items rose from 10 per cent in April to 44 per cent in June.
“Going forward, the risk of a broad-based and persistent decline in prices are limited as economic activities gradually resumes and demand conditions improve,” the BNM governor said.
The bank also expects underlying inflation to be within projection although Nor Shamsiah said this is still contingent upon movements in global oil prices and how fast the global economy recovers from the Covid-19 fallout.
BNM said it forecasted the Malaysian economy to recover gradually in the second half of 2020 as the economy progressively re-opens and external demand improves.
“Economic activity has resumed since the economy began to reopen in early May 2020,” the bank said in a statement.
“Consequently, growth is expected to have troughed in the second quarter of 2020, with a gradual recovery in the second half.”
The outlook is underpinned by the rebound of key indicators such as wholesale and retail trade, industrial production, gross exports, and electricity generation.