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KUALA LUMPUR (September 29): The World Bank said today that its 2020 economic growth forecast for Malaysia, measured by real gross domestic product (GDP), had slowed to a 4.9% contraction from the previously estimated decline in 3.1% after the fall of the country. GDP contraction more pronounced than expected in the second quarter of 2020 (2Q20) due to the impact of the Covid-19 pandemic.
According to the World Bank’s October 2020 East Asia and Pacific Economic Update released today, the change in its GDP forecast for Malaysia reflects increased uncertainty around the start and speed of the global recovery, which would affect decisions investment and external demand.
“Furthermore, the high unemployment rate and other weaknesses in the labor market would continue to weigh on private consumption.”
“Reflecting these developments, most components of demand (net exports, private consumption and private investment) are expected to contract in 2020. Public spending is expected to increase mainly due to stimulus spending,” said the World Bank.
The World Bank said Malaysia’s economy had been severely affected by the pandemic, causing a double-digit GDP contraction of 17.1% in 2Q20.
The 17.1% contraction of GDP was mainly due to a decrease in domestic demand due to the imposition of the movement control order (MCO) to stop the spread of Covid-19, as well as weak external conditions, according to the World Bank.
“The Malaysian economy is expected to contract in 2020, with risks to the outlook steadily tilted to the downside. The possibility of a longer-than-expected global recovery could continue to hamper investment decisions and further stifle external demand.
“There is a risk of stricter containment measures being adopted across the country, as illustrated by the recent resumption of the MCO in some states.
“Prolonged restrictions on international travel would weigh on the tourism sector. Lingering political uncertainties, including the possibility of a short-term general election, would continue to weigh on private investment sentiment and could halt the progress of the recovery effort,” he said. World Bank said.
The revised 2020 GDP forecast from the World Bank for Malaysia is within the Bank Negara Malaysia (BNM) contraction forecast of between 3.5% and 5.5% for the year.
However, according to BNM’s August 14 statement on the economic and financial developments in Malaysia in 2Q20, the country’s GDP is expected to grow between 5.5% and 8% in 2021.
“The Malaysian economy is expected to gradually recover in the second half of 2020 as the economy progressively reopens and external demand improves,” the central bank said.
The MCO, initially scheduled for March 18-31, required non-essential businesses to halt their operations, while the public was ordered to stay home to curb the Covid-19 outbreak.
On March 25, Prime Minister Tan Sri Muhyiddin Yassin said that the government had decided to extend the MCO until April 14 because updates from the National Security Council and the Ministry of Health (MoH) indicated an increase in Covid cases. -19.
On April 10, Muhyiddin said that the government would extend the MCO until April 28.
On April 23, he said that the MCO will now be extended for another two weeks until May 12.
On May 4, news reports, quoting Chief Minister (Security Group) Datuk Seri Ismail Sabri Yaakob, indicated that the regulations under phase four of the MCO would be null and void with the commencement of the control order. Conditional Motion (CMCO) or phase five of the OLS.
On May 10, Muhyiddin said that the CMCO would be extended until June 9.
On June 7, he said that the CMCO, scheduled to expire on June 9, would be replaced by the recovery motion control order (RMCO) from June 10 to August 31.
On August 28, news reports, citing Muhyiddin, reported that the RMCO had been extended until December 31.
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