KUALA LUMPUR - Malaysia recorded its slowest economic contraction in a year, slipping 0.5 per cent compared with the first quarter of 2020 despite continuing to grapple with a persistent wave of Covid-19 infections.
The modest decline provides some hope of a rebound after gross domestic product (GDP) shrank 5.6 per cent in 2020 following three consecutive quarters of negative growth.
"All economic sectors registered an improvement," said chief statistician Uzir Mahidin in a joint virtual press conference with the central bank on Tuesday (May 11).
However, manufacturing was the only sector to register growth (6.6 per cent compared with 3.0 per cent in the fourth quarter of 2020), while others merely slowed their fall.
Bank Negara Malaysia insisted Malaysia was on track to meet the official forecast of 6 per cent to 7.5 per cent growth despite heading into a third movement control order (the second this year) since the coronavirus pandemic hit in March 2020.
Prime Minister Muhyiddin Yassin announced Monday a nation-wide MCO which bars inter-district travel and various economic activities, especially services, although manufacturing is largely untouched.
Malaysia last week recorded 136 deaths and a daily average of over 3,600 new patients detected. In comparison, the daily average for most of March and April was under 2,000 cases.
The two MCOs this year are more lenient than the near total shutdown imposed in 2020. Official estimates put the economic loss at RM300 million (S$96.7 million) per MCO day this year as compared with RM2.4 billion in 2020.
Noting the first-quarter GDP figures, Bank Negara Malaysia governor Nor Shamsiah Yunus said: "What is encouraging in the Q1 performance is that despite MCO 2.0, the economy recorded better growth compared to Q4 2020."
However, she warned that "the balance of risks to the economic outlook continues to be tilted to the downside".
These include an escalation of coronavirus cases both at home and abroad, volatility in commodity and financial markets, slow roll-out of major projects and the crucial Covid-19 vaccination.
Most economists have projected growth lower than the government's range for 2021, with many believing pre-pandemic levels will not be reached this year.
"The modest recovery in Q1 was expected but for the official forecast to be met, there has to be a huge, possibly double-digit recovery in Q2," Socio-Economic Research Centre executive director Lee Heng Guie told The Straits Times.
Although he said there could be about one percentage point upside to the centre's 4 per cent growth estimate, he warned that "this could be dragged down by the Covid-19 surge, which has resulted in a renewed lockdown, while vaccinations are rolling out slower than expected".
Science, Technology and Innovation Minister Khairy Jamaluddin, who co-chairs the special committee on Covid-19 immunisation, admitted last week that although health front-liners have been fully inoculated and high-risk individuals are now getting the jab, uncertainty in vaccine supply is likely to result in delays for the general population who were supposed to begin receiving their shots this month.