The country's growth trajectory for 2021 remains on track amid positive indicators in the economy despite a resurgence of the Covid-19 virus and containment measures, Bank Negara Malaysia (BNM) Governor Nor Shamsiah Mohd Yunus said.
“The third quarter Gross Domestic Product (GDP) came in much better than consensus forecast and will put us on the path of growth trajectory," she said.
Malaysia's economy saw a contraction/growth of -2.7 per cent in the third quarter, an improvement from a -17.1 per cent registered in the second quarter as it took the full brunt of the movement control order (MCO).
Indicators suggest underlying domestic economic activities were on a recovery path from the trough in April, she said during a senior editors briefing on Thursday.
Among others, Malaysia's Purchasing Managers Index (PMI), Industrial Production Index (IPI) for construction-related counters, commercial vehicle sales, and credit card spending all remained on the expansion path.
Nor Shamsiah said the current conditional movement control order is more targeted and had better mobility compared with the previous one in May-June, hence, the impact would not be as bad as before.
Thus far, consumer spending has been good, she said.
She said the positive growth during the conditional MCO period could be attributed to an increasing number of merchants using cashless terminals, the growing use of cashless spending, and recovery in consumer spending, given the improvement in labour market conditions.
On the outlook for 2020, she said: "We took into account the possible resurgence of the virus and measures. Hence, the growth outlook for the year remains between -5.5 to -3.5 and the growth would most likely be on the lower end of our range.”
The fight against the pandemic is a marathon, she said, adding that the risk of resurgence could continue to evolve.
"You are going to see containment measures not only in Malaysia but also elsewhere. But what we have seen is that countries and medical experts understand it much better with standard operating procedures and contact tracing (put in place)," she said as Malaysia battles the third wave of Covid-19.
Households and businesses are also able to adjust more quickly to recent mobility restrictions, she said.
Accommodative monetary policy, continued assistance to vulnerable segments and cash transfers to affected households are gaining traction in supporting the economy, said the governor.
"More important is that the growth trajectory that we have announced into 2021 remains on track. We are going to see a rebound in growth next year," she said.
BNM had earlier forecast growth of 5.5 per cent to 8.0 per cent in 2021, while the Ministry of Finance, in its latest Economic Outlook, gauged the economy to grow between 6.5 per cent to 7.5 per cent next year.
She attributed the ministry's better outlook on the export sector as the latest data were much better than anticipated.
The Department of Statistics Malaysia recently announced that Malaysia’s exports grew 13.6 per cent to RM88.9 billion in September from a year earlier, the largest year-on-year expansion in nearly two years.
It was Malaysia’s highest export value ever recorded for the month of September, it had said.
"The IMF (International Monetary Fund) itself has revised growth projection for this year and more importantly, the growth with our trading partners have also improved from what we have seen."
Last month, the IMF said global growth is projected at -4.4 per cent for 2020, an upward revision of 0.8 per cent compared with the projection in June as activity began to improve, especially in advanced economies.
Besides these, Nor Shamsiah said continuous progress of infrastructure projects would also be supportive of growth.
She cited the Westport Terminal extension worth RM10 billion, West Coast Highway costing RM5 billion and a RM9 billion mixed development project in Bukit Bintang as some of the projects that are yet to be taken into account.
"Some of the public investment projects are also still ongoing. Budget 2021 saw greater emphasis on Jendela (the National Digital Network Initiative)," she said.
The government has allocated RM500 million to implement Jendela to ensure connectivity of 430 schools throughout Malaysia, covering all states.
At the same time, the Malaysian Communications and Multimedia Commission (MCMC) will allocate RM7.4 billion for years 2021 and 2022 to build and upgrade broadband services.
Besides these, the RM10 billion Kita Prihatin stimulus package and targeted repayment assistance would also support public consumption.
On the supply side in terms of the manufacturing and mining sectors, there would be higher production from existing facilities, said Nor Shamsiah.
Going forward, she said the country needs to remain focused on the key issues that would bring the economy forward such as supply-side policies to enhance the productive capacity of the economy and policies that would create more jobs and enhance people's income.
The biggest downside risk remains the resurgence and spread of the virus, while the upside risk is the availability of a vaccine and its effectiveness, she added. - Bernama
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