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Malaysia’s GDP shrinks 4.5% in Q3, recovery seen as pandemic’s impact fades
[KUALA LUMPUR] Malaysia’s economy shrank 4.5 per cent in the third quarter, losing its second quarter bounce, data released on Friday (Nov 12) showed, but the central bank expected a quick recovery as coronavirus restrictions are eased and economic activities resume.
The contraction was markedly worse than the median forecast for a 1.3 per cent contraction from a Reuters survey of economists.
Bank Negara Malaysia (BNM) said however recent indicators suggested a more positive momentum, with growth to accelerate in the fourth quarter and into next year.
“The growth outlook remains subject to Covid-19 risk factors globally and domestically, stability in global financial markets and gradual easing of supply chain disruptions,” BNM Governor Nor Shamsiah Mohd Yunus told a news conference.
Malaysia’s economy had rebounded from a pandemic-induced slump in the second quarter, but a surge in Covid-19 cases and the reimposition of curbs on movement have weighed on consumption and investment activity, Bank Negara said.
The central bank in August cut the country’s growth outlook for 2021 to 3-4 per cent.
Coronavirus infection rates, however, have slowed drastically in recent weeks amid a ramped-up vaccination programme, boosting hopes of a turnaround. More than three-quarters of Malaysia’s 32 million population are fully vaccinated.
Malaysia now expects growth to accelerate to between 5.5 per cent and 6.5 per cent next year as more sectors reopen and amid higher commodity prices and improved external demand.
Since last year, the government has rolled out RM530 billion (S$172.4 billion) in stimulus packages, while BNM has slashed its policy rate by 125 points to help the economy withstand the fallout of the pandemic.
BNM said its monetary policy stance would continue to be determined by new data and information, and that it was “mindful of a premature withdrawal of policy support”. Nor Shamsiah emphasised that Malaysia was not facing any stagflation and that price pressures will remain moderate in 2022. Headline inflation had slowed to 2.2 per cent in the third quarter, from 4.1 per cent in the second.
“(We) will continue to closely monitor signs of a more entrenched recovery in an environment of price instability,” Nor Shamsiah said.
“The bank also remains vigilant against a buildup of financial imbalances.”
REUTERS