MALAYSIA’S growth for the year could dip to -1% at worst or grow by 3.8% in the best circumstances, as it grapples with the Covid-19 pandemic, the Malaysian Institute of Economic Research (MIER) projects.

Malaysia could suffer a loss of up to RM72 billion in real gross domestic product value under the worst circumstances, said MIER deputy director Prof Dr Jamal Othman.

“Had there been no Covid-19 pandemic, our GDP should be higher by RM72 billion,” he said while presenting the national economic outlook 2020-2021 through a webinar today.

The RM72 billion figure is arrived at after taking into account the RM260 billion Prihatin stimulus package. Without it, RM128 billion would have been shaved from the GDP.

In the best scenario, the GDP losses with Prihatin could amount to RM7 billion, and RM60 billion without the package.

Jamal said after incorporating the fall in oil prices and without factoring in the pandemic, Malaysia’s baseline real-term GDP value was supposed to stand at RM1.478 trillion.  

“Given the pandemic, our GDP will fall from RM1.478 trillion to RM1.421 trillion. That is the expected fall to our GDP due to the movement-control order (MCO).

“However, after incorporating the Prihatin stimulus package, our GDP will rebound from RM1.421 trillion to RM1.474 trillion.”

MIER also projected that between 28,590 and 1.46 million jobs could be lost due to the pandemic, most likely non-salaried jobs or unskilled workers. .

Income losses, on the other hand, are projected between RM46.4 billion and RM128 billion.

Private consumption is expected to fall by RM106 billion in a worst-case scenario, or RM 38.6 billion at best. 

As for the GDP deflator, which measures the prices of all new domestically produced final goods and services, it is expected to fall by 3.33% or 0.54%. 

“Some sectors will see a fall in prices. The agricultural sector like food grains and processed food can expect a rise in terms of prices.

“But the overall GDP deflator will see a fall,” he said. 

Jamal also projected that only 20% of the non-fiscal injection from the Prihatin package will be turned into new capital. 

If more of these funds are turned into capital, it will spur economic growth.

Projections for  2021 

Depending on the GDP base in 2020, MIER projected Malaysia’s economic growth for 2021 to be 4.3% or 5.2%.

“This (5.2%) is due to lower GDP base in 2020 and larger fall in terms of trade, production and trade relations, particularly non-tariff measures,” he said.

The International Monetary Fund has projected 9% economic growth for Malaysia in 2021. 

https://www.theedgemarkets.com/article/imf-malaysias-gdp-grow-9-2021-fastest-among-asean5-countries

MIER also said Malaysia has the potential to achieve higher GDP growth with the injection of new capital and technical efficiency, which could improve productivity if the pandemic is contained. 

“We simulated an implementation of two potential investment bids currently under the purview of MIER – food security projects with Capex at RM87 billion and 5G technology adoption (RM15 billion capex).

“Presuming a marginal increase in technical efficiency among skilled labour and intermediate input, Malaysian GDP, under the best-case scenario in 2021, may rise markedly to 5.38%.” – April 23, 2020.