MALAYSIA’S economy is expected to grow between -3.5% and -5.5% this year, before rebounding next year, Bank Negara Malaysia said today.

The central bank has revised its full year growth forecast for 2020 from the previous projection of -2% to 0.5%, following months of restricted movements due to Covid-19.

It announced today that the country’s gross domestic product (GDP) contracted by -17.1% in the second quarter, the lowest since -11.2% registered in the fourth quarter of 1998.

For the first half of 2020, Malaysia registered a contraction of - 8.3%, said Bank Negara governor Nor Shamsiah Mohd Yunus in a virtual press conference today.

She said Malaysia is poised for a gradual recovery in the second half of the year.

“The economy is poised for a gradual recovery in the second half and rebound further in 2021.

“Overall, the Malaysian economy is forecasted between -3.5% and -5.5% in 2020 before staging a rebound within a growth range of 5.5% to 8% in 2021,” she said.

Growth in the second quarter will be underpinned by improvements in global growth trade and tech cycles, reopening of the domestic economy, income prospects and improved sentiments to support consumption spending.

Stimulus measures will also play a role.

Continuation in large public projects and recovery in commodity production will also be additional supporting factors, Nor Shamsiah said.

Commenting on the revised GDP growth forecast for this year, Nor Shamsiah said most countries were still under lockdown as of the second quarter.

As such, the International Monetary Fund also revised its global growth forecast from -3% in April to -4.9% in June.

The initial forecast was also based on the assumption that the MCO would only last for four weeks.

“However, the MCO lasted for an additional three weeks until May 3.”

Next year, a rebound will be underpinned by expected improvements in external conditions and gradual normalisation in economic activities and labour market conditions.

Headline inflation in 2021 is expected to average between 1% and 3% and be reflective of expected recovery in global oil prices and better domestic demand conditions.

This will be an improvement of average headline inflation in 2020, which is likely to be negative, in line with the earlier projected range of -1.5% to 0.5%, primarily reflecting substantially lower global oil prices.

The outlook for 2021 is recovery is still subject to global uncertainties surrounding oil and commodity prices, as well as the Covid-19 pandemic. – August 14, 2020.