KUALA LUMPUR, Feb 11 — The gross domestic product (GDP) contraction in the fourth quarter of 2020 (Q4 2020) is within expectations given the extension of the conditional movement control order (CMCO) which had limited the economic activities during the period.
Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said marking the third consecutive quarter of decline, domestic demand in Q4 contracted at a much rapid pace to 4.4 per cent, led by a 4.1 per cent decline in private sector spending, alongside the massive contraction in public investment of 19.8 per cent.
“Nonetheless, the external demand was the saviour with net exports posting 12.4 per cent expansion along with 2.7 per cent growth in public sector consumption. The data point has been very much anticipated by most economists.
“One thing that we have learnt from the statistics is that the restriction in human mobility and limitation on business operation will cause a significant toll on the economy, although this was done in order to curb the spread of the virus,” he told Bernama today.
He said if the country is able to contain the infection and execute the vaccination programme in a timely manner, the reopening of the economy could be more convincing.
Mohd Afzanizam said, with the economic stimulus already in place, economic activities should be able to accelerate once the pandemic has been resolved.
“For now, we can expect the economic activities would remain tepid and the recovery would take a while to be sustained,” he added.
Meanwhile, Axi chief global market strategist Stephen Innes said while a contraction in the GDP is never a welcome sight, optimism remained strong given that the vaccine would start to roll out in Malaysia later this month.
He said the tail risk is that the economic beatdown for the current MCO extensions could bleed into the actual Q1 GDP.
Malaysia’s economy contracted 3.4 per cent in Q4 2020 with the resurgence in COVID-19 infections, bringing the figure for the full-year, which was marked by lockdowns and border closures globally, to -5.6 per cent.
The economic growth for 2020 was slightly lower than what Bank Negara Malaysia’s (BNM) earlier forecast of between -5.5 per cent and -3.5 per cent.
Meanwhile, Department of Statistics Malaysia chief statistician Datuk Seri Dr Mohd Uzir Mahidin said the country last recorded a contraction in 2009 at -1.5 per cent, and 2020’s contraction was the worst since the 7.4 per cent decline in 1998 during the Asian Financial Crisis.
“The slower growth in the quarter was driven mainly by tighter movement restrictions, as well as commodity supplies disruption but offset by continued growth in external demand,” he said in conjunction with the release of the Q4 GDP, which was held virtually on Thursday.
— Bernama
