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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 ,one%.
In a statement today, the World Bank said the change in forecast reflected increased uncertainty around the start and speed of the global economic recovery, which would affect investment decisions and external demand.
In addition, the high unemployment rate and other weaknesses in the labor market would continue to weigh on private consumption, he added.
Following temporary economy-wide shutdowns and downsizing business operations, the World Bank said the labor market was significantly affected, with unemployment rising to 5.1 percent in the second quarter of 2020, its lowest rate. high in thirty years.
Labor force participation fell to 68.1 percent in the second quarter from 68.8 percent in the first quarter, 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,” the World Bank said following the release of its Update report. Economic for East Asia and the Pacific.
Malaysia’s economy is severely affected by the Covid-19 pandemic, causing a double-digit contraction of 17.1 percent in the second quarter of 2020, mainly driven by a decline in domestic demand due to the imposition of the motion control command to stop its spread. , as well as weak external conditions.
Public spending is expected to increase, mainly due to stimulus spending, the bank said.
Meanwhile, poverty at the upper-middle-income poverty line of USD 5.50 per day (2011 purchasing power parity dollars) is projected to increase slightly to 0.9% from 0.8% in 2020.
The World Bank said the increase was due to higher unemployment, shorter working hours and slower business activity for small and medium-sized enterprises (SMEs), although these contractionary effects were offset to some extent by government recovery and relief measures that cushion the impacts on private consumption. .
“The 2011 PPP poverty rate of USD 5.50 per day is expected to decrease to 0.6% in 2021 and 0.5% in 2022.-Called
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