Malaysia's GDP shrinks 5.6% for worst result since 1998 Asian financial crisis

Malaysia is in its third iteration of Covid-19 restrictions since the pandemic began just over a year ago. The economy was almost entirely shut down between March and June last year - causing GDP to contract by a whopping 17.1 per cent in the second
Malaysia is in its third iteration of Covid-19 restrictions since the pandemic began just over a year ago. The economy was almost entirely shut down between March and June last year - causing GDP to contract by a whopping 17.1 per cent in the second quarter.PHOTO: REUTERS

Malaysia's economy declined further in the fourth quarter of 2020, leading to a worse contraction in gross domestic product (GDP) than initially projected by the government.

Department of Statistics Malaysia chief Uzir Mahidin said yesterday that fourth-quarter GDP fell by 3.4 per cent - bigger than the 2.7 per cent decline in the third quarter. Overall GDP shrank by 5.6 per cent, the biggest contraction since the 1998 Asian financial crisis.

The Finance Ministry had previously said it expected the economy to shrink by 4.5 per cent in 2020. Malaysia recorded 4.3 per cent GDP growth in 2019.

Between October and December last year, much of the country came under renewed restrictions, including travel curbs, as the government scrambled to deal with a third wave of Covid-19 infections.

Datuk Seri Uzir said the construction, mining and services sectors posted the biggest declines last year, contracting by 19.4 per cent, 10 per cent and 5.5 per cent respectively.

The governor of Bank Negara Malaysia, the central bank, Datuk Nor Shamsiah Mohd Yunus, yesterday said the labour market is expected to remain weak in the first half of this year before improving.

The unemployment rate stood at 4.8 per cent at the end of 2020 after surpassing 5 per cent in the middle of the year, the highest rate in three decades.

Ms Nor Shamsiah was confident, however, that the economy would recover this year, in line with expected vaccine roll-outs and global economic recovery, although she cautioned that downside risks due to the Covid-19 situation remained.

The central bank is expected to release its revised outlook for 2021 economic growth next month. Initial projections by the Finance Ministry put growth this year at between 6.5 per cent and 7.5 per cent.

The central bank governor also said that targeted loan repayment assistance offered by banks were sufficient to deal with the economic impact of ongoing partial lockdowns, amid calls for a blanket loan moratorium - akin to that announced in March last year - to be re-introduced.

"It is a fallacy to assume the economy would be helped by an automatic moratorium," Ms Nor Shamsiah said at yesterday's press briefing.

Malaysia is in its third iteration of Covid-19 restrictions since the pandemic began just over a year ago. The economy was almost entirely shut down between March and June last year - causing GDP to contract by a whopping 17.1 per cent in the second quarter.

A resurgence in infections saw partial curbs being introduced in October.

A one-month re-opening of the economy at the end of the year caused another surge in cases, leading to a partial lockdown being instituted in mid-January. This is scheduled to end on Feb 18.

Malaysia is under a seven-month state of emergency to deal with the pandemic.

A version of this article appeared in the print edition of The Straits Times on February 12, 2021, with the headline 'Malaysia's GDP shrinks 5.6% for worst result since 1998 Asian financial crisis'. Subscribe