KUALA LUMPUR (June 25): The International Monetary Fund (IMF) has revised its Malaysia 2020 gross domestic product (GDP) forecast to a 3.8% year-on-year (y-o-y) contraction from the previously estimated 1.7% contraction as the Covid-19 pandemic has had a more negative impact on global activity in the first half of 2020 (1H20) than anticipated.
The IMF said in its June 2020 World Economic Outlook Update report that global economic recovery is projected to be more gradual than previously forecast.
"Global growth is projected at -4.9% in 2020, 1.9 percentage points below the April 2020 World Economic Outlook forecast. For 2021, global growth is projected at 5.4%. Overall, this would leave 2021 GDP some 6½ percentage points lower than in the pre-Covid-19 projection in January 2020.
"The adverse impact on low-income households is particularly acute, imperilling the significant progress made in reducing extreme poverty in the world since the 1990s,” the IMF said.
Bank Negara Malaysia (BNM) said in its Economic & Monetary Review 2019 report that against the highly challenging global economic outlook, it projected Malaysia’s GDP growth to be between -2% and 0.5% in 2020.
According to the central bank, risks to global growth were tilted to the downside, mainly reflecting significant uncertainties surrounding the Covid-19 pandemic.
"The extent of the economic impact arising from this pandemic would be contingent on the severity and duration of the outbreak in various economies and the corresponding measures undertaken to contain this global health crisis. Weakness in the real economy could be further weighed down by prolonged tightening of global financial conditions."
Malaysia’s 2019 GDP grew 4.3% from a year earlier, while first quarter of 2020 (1Q20) GDP expanded 0.7%, according to BNM and the Department of Statistics Malaysia (DOSM).
For 1Q20, BNM said in a statement on May 13, 2020 that on a quarter-on-quarter seasonally-adjusted basis, the economy contracted 2% during the quarter.
"The global and Malaysian economic outlook for 2020 will be significantly impacted by the Covid-19 pandemic as strict measures to contain the spread of the pandemic will weigh considerably on both external demand and domestic growth. The Malaysian economy is expected to contract in the second quarter. This reflects the longer duration of containment measures both globally and domestically.
"When these containment measures are eased and the domestic MCO (movement control order) is lifted, economic activity is expected to gradually improve in 2H20. The sizeable fiscal, monetary and financial measures and progress in transport-related public infrastructure projects will provide further support to growth in 2H20. In line with the projected improvement in global growth, the Malaysian economy is expected to register a positive recovery in 2021,” BNM said.