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KUALA LUMPUR: Malaysia’s economy is forecast to shrink 6% this year due to the impact of the Covid-19 pandemic, but will rebound 6.6% next year, according to the Oxford Economics Global Economic Outlook report.
The report released on Monday said that while the nationwide movement control order in Malaysia compounded the economic damage in Q2, the payoff has been evident, with the pandemic situation currently in hand, helping the economy to regain your balance.
“Malaysia’s exports would benefit from improving Chinese import demand and the electronics cycle. However, the speed of its recovery is likely to slow given current low global demand, high unemployment and weak investment, and its economy is forecast to contract 6% this year, followed by growth of 6.6% in 2021, ”he said.
The report, commissioned by the chartered accounting body, the Institute of Chartered Accountants in England and Wales (ICAEW), said that although the Recovery Motion Control Order has been extended until December 31, 2020, almost all sectors have been able to operate.
However, only a small number of sectors are still restricted, such as nightclubs and entertainment centers.
“The entry of foreign tourists has also been restricted. The tourism sector contributes to 15.2% of the Malaysian national economy with 194 industries involved in the sector chain, including services exports, ”he said.
Overall, in its assessment and outlook for the region, the report said that the Covid-19 pandemic caused the largest growth shock that Southeast Asia has experienced since the Asian financial crisis in 1997, and regional growth is forecast to contract. by 4.2% in 2020, according to a new report.
He also noted that while economic activities are recovering again and growth is expected to finally recover to 6.4% in 2021, the pace of recovery during the second half of 2020 will vary across the region, depending on the easing of restrictions. blocking and improving exports. demand.
The Covid-19 outbreak reduced global GDP by around 9% in the first half of 2020, at least three times the size of the global financial crisis of 2007-2009. Despite a very strong rebound in the third quarter of 6.4%, the report suggests that global GDP will generally contract by 4.4% in 2020.
However, momentum is building in the second half of 2020 (H2), which will drive growth to 5.8% in 2021 and lead the global economy to recover to its pre-crisis peak in the middle of next year, a similar period of time. such as the recovery from the financial crisis after 2008.
The strength of the rebound in economic activity over the next few quarters in Southeast Asia remains uncertain, particularly in the fourth quarter of 2020, after the initial strong rebound in world trade and post-lockdown domestic activity has subsided. dissipated.
Furthermore, the different success rates in containing the Covid-19 outbreak and different lockout exit strategies will widen the disparities in economic growth in the region.
Economies that have convincingly contained the outbreak, such as Thailand and Vietnam, will see a stronger recovery than Indonesia and the Philippines, which are battling new waves of the Covid-19 outbreak after restrictions were prematurely relaxed.
“The pace of recovery in Southeast Asia in the second half of 2020 will vary in the region,” he said.
While growth in Singapore is forecast to contract by 5.7% this year due to a severe decline in world trade, signs of a recovery in exports and imports will see it rebound to 6.1% in 2021.
Strongly export-oriented economies such as Singapore and Vietnam will continue to benefit from a stabilization in trade indicators, as evidenced by recent improvements in exports in recent months.
The report predicted that prospects for recovery looked more promising for Vietnam, which had contained the virus very effectively until recently.
Vietnam is expected to be the only Southeast Asian economy to post positive growth this year, with GDP growing at 2.3% this year and 8% in 2021.
According to the report, the way governments have handled the health crisis has had a direct impact on how strong the impact on economic activity has been in the second quarter of the year (Q2).
Economies that went into lockdown quickly or in a less stringent but more efficient manner have been able to ease restrictions much earlier and mitigate further economic damage.
“The road to recovery for Southeast Asian economies will be long, with tensions between the United States and China, a long-term slowdown in global business activity, and the Covid-19 pandemic affecting the region’s growth prospects. “said Mark Billington, ICAEW Regional Director, Greater China and Southeast Asia.
“While each country’s economy has suffered due to the crisis, the unique economic structures mean that the crisis has played out in different ways.
“Ultimately, countries that can strike a balance between resuming economic activity and keeping the outbreak under control will see their economies recover faster than the rest.”
ICAEW industry leaders, during an organized international economic forum, also discussed expected growth in the Middle East, China and Southeast Asia.
They had focused on the recovery of consumption, accommodative macroeconomic policies, international trade and the impact of the investment shift.
Scott Livermore, Chief Economist and Managing Director of Oxford Economics Middle East, presented the report’s key findings at the inaugural global forum. Scott was joined by other panelists, including Dr. Ernest Kan, Chief Capital Markets Adviser, China, Singapore Exchange; Zibo Cao, associate director, Macquarie Fund for Infrastructure and Real Assets; and Tim Fox, economist.
ICAEW said the panel discussion addressed the prospects for the global and regional recovery from the pandemic, particularly the rebound in China and its implications for Southeast Asia.
The panelists also shared their views on how well the region’s governments have handled the pandemic and how different recovery progress across economies would affect the region in the future.
Other findings of the report include:
• Chinese exports should rebound but could be affected by ongoing trade tensions
In China, economic growth is likely to remain relatively strong during the second half of 2020.The country’s GDP is expected to grow 2.5% in 2020 and accelerate to 7.9% in 2021, supported by strong demand for electronic products and exports of protective equipment and medical equipment. during the coronavirus pandemic.
However, in the medium term, tensions with the United States may disrupt demand for goods and increase disruption in manufacturing, and efforts to decrease US dependence on China will have a negative impact.
• A slow recovery is expected for the economies of Indonesia and the Philippines
The situation remains precarious in Indonesia and the Philippines, with infections accelerating again after lockdown restrictions were relaxed, causing reopening plans in these countries to be halted or reversed.
Both economies remain highly vulnerable as they have weaker public health infrastructure, lower levels of available fiscal support, and are much more consumer-driven than others in the region.
The pace of recovery in Indonesia is expected to be slow and household incomes to decline. GDP is expected to contract 2.7% in 2020 before expanding 6.2% in 2021.
The Philippines will record the largest contraction in Southeast Asia, with a GDP drop of 8.2% in 2020, due to its dependence on international tourism and a slow exit from the blockade.
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