Affin Hwang sees 3.5pc contraction this year but 4pc growth next year

KUALA LUMPUR: Malaysia’s real gross domestic product (GDP) is expected to contract 3.5 per cent this year before expanding 4.0 per cent next year, said Affin Hwang Capital.

Its chief economist and head of research, Alan Tan, said a recovery could be expected in the second half of this year but the GDP would remain in the negative territory.

“The negative contraction will be the sharpest in the second quarter and we project it at as much as 10 per cent, judging from the weak exports, production and domestic demand,” he said at Affin Hwang’s second half economic outlook and sectoral briefing yesterday.

“Recovery in the second half will also likely be slow. ”

The negative growth would not turn positive anytime soon, he added.

“When I say recovery in second half, it does not mean things are going back to normal. It is that we may see less negative growth. The situation where recovery will be positive in terms of GDP will only be next year.”

Affin Hwang expects exports to contract 8.8 per cent this year before recovering to 6.0 per cent growth next year.

“If you look at May exports numbers, there was a sharper contraction compared with April and that was understandable as it was affected by the Conditional Movement Control Order (CMCO).

“Despite the reopening of factories and businesses, exports numbers continued to show very sharp contraction.

“This indicates that the global supply chain disruption remains and that it may continue to drag on Malaysia’s exports at least for another two quarters.”

Tan added that domestic demand continued to hold up and was supported by the stimulus measures announced by the government.

Malaysia’s exports contracted 25.5 per cent to RM62.69 billion in May while imports decreased 30.4 per cent to RM52.27 billion.

Compared with April, exports and imports slipped by 3.2 and 23.6 per cent, respectively.