Analysts: Tough 2020 GDP a ‘one-off situation’
KUALA LUMPUR: Malaysia’s decline in its full year 2020 gross domestic product (GDP) by 5.6 per cent year on year (y-o-y) is expected to be a one-off situation amid a global pandemic-induced environment.
Public Investment Bank Bhd (PublicInvest Research) said the nature of it is unprecedented given the global scale of this pandemic which culminated in drastic containment measures such as isolation, lockdown and mass closures that weighed heavily on economic activity.
“The adverse impact of Covid19 was multi-fold, among which included the demand and supply shock for manufacturing, and a drastic drop in mining output after Opec+ was pushed to cut supplies to support oil prices,” it said in its summary yesterday.
“To mitigate severe economic contractions, however, governments around the world rolled out massive fiscal aid, including Malaysia, stretching their fiscal conditions to the limit.
“Malaysia also unleashed monetary stimulus measures that culminated in a 125 basis points cuts in the overnight policy rate (OPR) in 2020.”
A combination of fiscal and monetary stimulus are expected to produce tangible results in 2021, PublicInvest Research said, especially in the second half of the year which could push Malaysia’s growth to rebound to 6.2 per cent y-oy in 2021 – one of the sharpest turnarounds since the 2008 Global Financial Crisis.
“Note that Malaysia navigated the Covid-19 pandemic quite well amid a smaller drop in output relative to regional peers like the Philippines and Singapore though comparison with Indonesia and Thailand cannot be made as they have not announced their full year GDP numbers,” it compared.
“We are trailing countries
The adverse impact of Covid-19 was multifold, among which included the demand and supply shock for manufacturing, and a drastic drop in mining output after Opec+ was pushed to cut supplies to support oil prices.
PublicInvest Research
like China and Vietnam, the latter two having stronger trade momentum and bigger populations to support demand and the services sector.
“China also ramped up capital spending to boost the economy amid the unleashing of its time-tested investment-driven strategies, a path emulated by Vietnam as well. China and Vietnam were among the 24 countries in the world that recorded positive GDP growth in 2020.”
Barring a slower-thanexpected recovery in contact-sensitive sectors like services, the research house expect Malaysia’s growth to reaccelerate in its second half amid sentiment that is expected to improve following the forthcoming vaccination programme that will start in April for the general population, running through until February 2022.
Downside risks are contained at this juncture thanks to the swift action to procure ample supply of vaccine from multiple suppliers such as AstraZeneca and Pfizer, Sinovac and CanSino Gamaleya.
“The sharp economic turnaround in 2021 will push output to exceed pre-crisis levels and therefore, a projected improvement in GDP per capita,” PublicInvest continued.
“On the same note, 4Q20 GDP that declined by 3.4 per cent yo-y was pulled down by a sharp decline in domestic demand especially private consumption despite the massive fiscal aid and accommodative interest rate environment.
“This was no thanks to 79 days of partial economic closure especially in highlyindustrialized and significant economic areas like Selangor, Wilayah Persekutuan (KL) and Johor.”