PETALING JAYA: Malaysia’s GDP grew 16.1% in the second quarter of this year, supported mainly by an improvement in domestic demand and continued robust exports performance, according to Bank Negara Malaysia (BNM).
It pointed out the strong growth also reflects the low base due to a significant decline in activity during the same quarter of last year. In comparison, 1Q’2021 saw a 0.5% contraction.
The central bank stated economic activity picked up at the start of the second quarter, but slowed down thereafter, following the re-imposition of stricter containment measures nationwide under the Full Movement Control Order (FMCO).
Nonetheless, all economic sectors registered an improvement, particularly the manufacturing sector.
With expenditure, growth was driven by higher private sector spending and strong trade activity.
Quarter-on-quarter (q-o-q), the Malaysian economy saw a 2.0% decline (1Q’2021: 2.7%) on the back of tighter containment measures.
“While the containment measures weighed on growth, greater adaptability to restrictions and ongoing policy support have partly mitigated the impact,” BNM’s governor, Datuk Nor Shamsiah told media during the virtual 2Q’21 GDP briefing.
Moving forward, the central bank believes Malaysia’s growth trajectory will depend on the containment of the pandemic and the health outcome of the nationwide vaccination programme, which will allow the economic sectors to reopen and lift household and business sentiment.
With that it has revised Malaysia’s growth projection for 2021 to 3.0-4.0% from an earlier estimate of 6.0-7.5%, largely due to the implementation of FMCO.
The revision is due to several developments that have emerged surrounding the pandemic, Shamsiah elaborated since BNM’s initial forecast in March, the government has shifted from a targeted and localised containment measures implemented at the start of the year to a nationwide lockdown in June due to a high transmission risk.
She outlined the FMCO is expected to have a cumulative impact of about 5 percentage points to the 2021 growth which translates to an average of RM400 to 500 million in daily real output losses.
“With 7.1% growth recorded in the first half of the year, and given the Covid-19 related developments since June onwards, we are looking at a more moderate growth in the second half of the year especially in the third quarter.”
Nonetheless, the governor stated there are some factors that would continue to support growth in 2H’2021.
Among which is the fact that essential economic factors are still allowed to operate under Phase 1 of the National Recovery Plan which mitigates the impact of the containment measures, a higher adaptability to remote work and labour constraints as well as increased automation and digitalisation.
Apart from that she listed the improvement of external demand driven by strong growth in major trading partners that will further reinforce the recovery in domestic demand as well as a rapid vaccination progress which will lead to better health outcomes which will allow easing of mobility restrictions and faster reopening of more economic sectors and activities.
Shamsiah noted there growth prospects will be supported by a sizable and continuous policy support to the various stimulus programmes, and continued investment in large infrastructure projects such as the Mass Rapid Transit 2, Light Rail Transit 3 and the East Coast Rail Link.
“Looking ahead to 2022, we expect growth to accelerate supported by reopening of most economic sectors as well as positive spillovers from continued improvement in external demand.”