M’sia’s slowdown larger than expected — Analysts
KUCHING: Malaysia’s 2021 growth forecast has been revised downwards by analysts to 3.7 per cent as recovery has been slower than expected.
The research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) recapped that Malaysia’s real gross domestic product (GDP) declined by 4.5 per cent year on year (y-o-y) in the third quarter of 2021 (3Q21) after hitting an all-time high growth of 16.1 per cent y-o-y in 2Q21.
“The contraction of GDP during the quarter was deeper than market consensus (-1.3 per cent y-o-y) and also our estimate (-3 per cent y-o-y),” MIDF Research said in its update on the 3Q21 National Account.
“The deterioration in the economic growth was larger than expected following the extension of the stringent movement control order (MCO) 3.0 into the 3Q21.
“The full lockdown had caused consumer spending and business activities to weaken during the quarter following the temporary closure of non-essential economic sectors and restrictions on people’s mobility.”
The research arm gathered that compared to the other Asean-5 economies, Malaysia was the only country in the region to record negative growth during the quarter while the other nations grew at a moderate pace.
“Taking into account the larger than expected drop in 3Q21 GDP growth, we revise down our growth projection for 2021 to 3.7 per cent from 4.6 per cent previously.
“Although growth momentum will be improving from 4Q21 as the economy returns back to the recovery path coming out from the full lockdown, we are cautious on the strength of recovery as the improvement in the real economy seems to be more gradual.
“A potential weakness in the external demand, high commodity prices, and prolonged global supply chain disruption could also affect the near-term growth outlook.”
Nonetheless, MIDF Research foresees growth prospects will improve in view of the reopening of the economy and the expected recovery in the domestic spending activities.
“Furthermore, business activities will also increase as firms ramp up production to cope with the improving domestic demand and sustained growth in exports.”
For next year, the research arm opined recovery momentum will be stronger after this year’s growth has been much weaker than anticipated, unfortunately derailed by the resurgence of Covid-19 infections and imposition of lockdowns.
The contraction of GDP during the quarter was deeper than market consensus (-1.3 per cent y-o-y) and also our estimate (-3 per cent y-o-y).
MIDF Research