Malaysia's economy contracted by 17.1 per cent in the second quarter from the same period last year, hit by a global downturn and partial shutdown resulting from the coronavirus pandemic.

This is the country's worst performance since the Asian financial crisis, when the fourth quarter of 1998 saw an 11.2 per cent contraction in gross domestic product (GDP).

"The decline reflected the unprecedented impact of the stringent containment measures to control the Covid-19 pandemic globally and domestically," Bank Negara said in a statement yesterday.

Malaysia's movement control order implemented from March 18 to contain the spread of the virus restricted travel and shut down schools and most businesses, severely affecting production and consumption activities.

With the gradual reopening of the economy since May, the central bank expects GDP to improve, within the range of minus 3.5 per cent to minus 5.5 per cent this year. It expects a sharp rebound next year, with economic growth estimates at between 5.5 per cent and 8 per cent.

"The economy is poised for a recovery in the second half and will rebound further in 2021," Bank Negara governor Nor Shamsiah Mohd Yunus told a virtual news conference yesterday.

She added that the data suggests that the economic fallout was at its worst in April, during the height of the coronavirus containment restrictions. In the first quarter of this year, the economy managed to post marginal growth of 0.7 per cent year on year.

A sharp decline was seen in April when GDP contracted 28.6 per cent, while it improved in May to negative 19.5 per cent and continued to further improve in June by registering a smaller contraction of 3.2 per cent.

On the production side, all sectors recorded negative growth with the exception of the agriculture sector.

A significant decline in tourist arrivals amid international travel restrictions contributed to the contraction in the service sector, said the Department of Statistics' chief statistician Mohd Uzir Mahidin.

The service and manufacturing sectors recorded negative 16.2 per cent and negative 18.3 per cent growth, respectively, while the construction sector shrank 44.5 per cent.

Other indicators such as sales and vehicles registration declined sharply for April and May.

Key drivers expected to boost the economy include the reopening of the domestic economy, stimulus measures and large public transportation projects.

The unemployment rate, which increased in the second quarter to 5.1 per cent from 3.5 per cent in the first quarter, is also expected to improve in line with the recovery in economic activity.

"I am cautiously optimistic that the worst is behind us," said Datuk Nor Shamsiah.

Malaysia has recorded a total of 9,149 cases of Covid-19 and 125 deaths since the start of the outbreak, with 20 new cases confirmed yesterday.