Bank Negara slashes 2021 GDP forecast to 3-4%

 

Bank Negara said the revision was needed as growth had been hampered by Covid-19 mitigation measures.

PETALING JAYA: Bank Negara Malaysia (BNM) has downgraded its 2021 GDP forecast to 3-4% growth, a sharp decline from the central bank’s earlier projections.

In May, it stated that the country was on track to record 6-7.5% growth this year, but movement restrictions brought by the Covid-19 pandemic and the strain this had placed on the economy prompted the central bank to nearly halve its earlier prediction.

Finance minister Tengku Zafrul Aziz said last month that a steep cut could be in the pipeline, telling Bloomberg TV it could be “around the range” of 4%.

At a press conference today to present the country’s Q2 GDP results, BNM governor Nor Shamsiah Mohd Yunus said the revision was based on growth being hampered by Covid-19 mitigation measures and the expected slow recovery of the services and tourism sectors.

However, she expected export-oriented sectors to see strong recovery in tandem with improved global demand.

She added, however, that its growth projection was predicated on the assumption that the entire country will move into Phase 3 of the national recovery plan (NRP) come October and Phase 4 by November, which will come with almost complete reopening of all economic sectors.

As such, the country’s growth will be reliant on the speedy administration of vaccines and their effectiveness against variants, as well as containment measures proving effective enough to allow the country to transition to the next phase of the NRP in a timely manner.

Q2 sees sizeable bump

For the second quarter of 2021, Malaysia’s economy expanded by 16.1% year-on-year, buoyed by improvements in all sectors, specifically manufacturing.

While domestic demand and exports helped support this growth, BNM admitted the high growth figure was also in part due to the low base against which the growth was measured, with GDP cratering 17.1% in Q2 last year.

Economic performance appeared strong at the start of Q2, but slowed when additional restrictions were introduced, such as the imposition of the nationwide movement control order in May.

Quarter-on-quarter, the economy declined by 2.0%, largely due to these enhanced restrictions.

“While the containment measures weighed on growth, greater adaptability to restrictions and ongoing policy support have partly mitigated the impact,” Nor Shamsiah said. - FMT