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KUALA LUMPUR: After a more pronounced contraction than expected in the second quarter of 2020 (2Q20), the World Bank has reduced the forecast for economic growth for Malaysia this year to a contraction of 4.9%, compared to an initial estimate of -3.1%.
In a statement today, he said that the change in the forecast reflects the greater uncertainty around the start and speed of the global economic recovery, which would affect investment decisions and external demand.
He added that the increase in the unemployment rate and the weakness of the labor market would continue to weigh on private consumption.
Following the temporary shutdowns of the entire economy and the reduction in business operations, the World Bank said the labor market was significantly affected, with unemployment rising to 5.1% in 2Q20, its highest rate in 30 years. .
Labor force participation decreased to 68.1% in 2Q from 68.8% in 1Q, and many workers faced reduced hours and wages.
“Reflecting these developments, most components of demand, such as net exports, private consumption and private investment, are expected to contract in 2020,” it said after the release of its economic update report for Asia. Eastern and the Pacific.
Malaysia’s economy was severely affected by the Covid-19 pandemic, causing a double-digit contraction of 17.1% in 2Q20, mainly driven by a decline in domestic demand due to the imposition of the control order. movement to slow its spread, as well as weak external conditions.
Public spending is expected to increase, mainly due to stimulus spending, the bank said.
