Malaysia’s GDP likely to remain in contraction in Q3 2020, says RHB Investment Bank

Malaysia’s real GDP growth contracted 17.1 per cent in the second quarter (Q2), marking the steepest quarterly decline since records began. — Picture by Hari Anggara
Malaysia’s real GDP growth contracted 17.1 per cent in the second quarter (Q2), marking the steepest quarterly decline since records began. — Picture by Hari Anggara

KUALA LUMPUR, Aug 14 — While the worst is over for Malaysia considering the restrictions have eased, gross domestic product (GDP) growth will still likely remain in contraction in the third quarter (Q3) this year, says RHB Investment Bank Bhd.

In a note today, it said the economy is still running at below its full capacity.

“In addition, the risk of subsequent waves of Covid-19 could bring back stricter measures, which could derail growth momentum going forward.

“We maintain our GDP growth forecast at -4.0 per cent for 2020,” it added.

Malaysia’s real GDP growth contracted 17.1 per cent in the second quarter (Q2), marking the steepest quarterly decline since records began.

The contraction even surpasses the lowest point during the Asian Financial Crisis of -11.2 per cent posted in the fourth quarter of 1998.

Quarter-on-quarter growth also showed a sharp decline at -15.9 per cent.

RHB Investment said the sharp decline in growth was within its expectations given the severe reductions seen in the Industrial Production Index (IPI) as well as many other early indicators.

“From the GDP data, tourism-related sectors (transport, accommodation, retail) seemed to bear the worst brunt of the government-imposed lockdown.

“Meanwhile, sectors related to utilities, finance, communications, and electrical & electronics appear to fare better amid the pandemic,” it added.

On the expenditure side, significant contraction is seen in private consumption, investment and net exports but these are offset by marginal contribution from the positive government consumption during the period, said the investment bank.

Private consumption fell 18.5 per cent, reflecting restricted consumer demand following the movement control measures.

Investment dropped sharply (-28.9 per cent), with private and public investments falling 26.4 per cent and 38.7 per cent respectively.

Meanwhile, by type of investments, there were declines all around with the sharpest fall seen in structures (-41.2 per cent). — Bernama

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