KUALA LUMPUR (May 13): Malaysia's economic growth slowed to 0.7% in the first quarter of this year (1Q 2020) — the lowest level seen since 3Q 2009 when the economy then contracted by 1.1%, according to the Department of Statistics Malaysia.
Gross domestic product (GDP) in 4Q 2019 expanded by 3.6%.
Chief statistician Datuk Seri Dr Mohd Uzir Mahidin said Malaysia is expected to continue recording a slower economic growth in 2Q 2020 due to the Covid-19 pandemic, based on the near-term economic direction portrayed by the Leading Index (LI) for the reference month of February 2020.
This is supported by the downward movement under the long-term trend of LI beginning reference month of December 2019.
Mohd Uzir said GDP growth for 1Q 2020, meanwhile, was dragged by negative growth across all sectors except for services and manufacturing which grew 3.1% and 1.5% respectively.
"Private final consumption expenditure in this quarter was on essential products such as food and non-alcoholic beverage, communication and housing, water, electricity and other fuels," he said in a statement on Malaysia's economic performance in 1Q 2020, today.
He added that the Movement Control Order (MCO), which began on March 18, has resulted in lower household expenditure, which in turn, directly affected the industries related to food and beverage, accommodation, transportation, sports and recreation.
This is due to the interconnection between consumption and production of goods and services.
Based on estimates by the United Nations, the World Bank and the International Monetary Fund, Mohd Uzir said Malaysia could have attained a higher economic growth without Covid-19.
The analysis, which was done in accordance to the System of National Accounts, had projected the local economy to grow in the range of 3.9% to 4.2% in 1Q 2020, he explained.
"With an economy valued at RM1.4 trillion and being a major trading country with an annual trade value of RM1.9 trillion, Malaysia was not spared from the unfavourable global economic performance."
According to Mohd Uzir, there are 194 industries operating in the chain of the tourism sector. This has impacted the economy significantly, as the tourism sector was badly hit by the Covid-19 pandemic.
The sector accounted for 15.2% of Malaysia's economy, valued at RM220.6 billion with 3.5 million people employed.
"Our exports to China have shrunk significantly since January. This includes service exports due to the decline in tourist arrivals in our country," he noted.
On sectoral performance, Mohd Uzir said the services sector continued to be the main impetus for the country's economy, backed by the information and communication, wholesale and retail, as well as finance and insurance sub-sectors.
The information and communication sub-sector was driven by the telecommunication segment, owing to the work from home phenomenon due to the MCO. As a whole, the services sector's growth slowed from 6.2% in 4Q 2019.
The manufacturing sector, which also registered a slower growth from 3% in 4Q 2019, was contributed by petroleum, chemical, rubber and plastic products (+3.9%), electrical, electronic and optical products (+2.2%), and wood, furniture, paper products (+1.3%).
Other sectors that recorded a contraction in 1Q 2020 include agriculture, mining and quarrying, and construction at 8.7%, 2% and 7.9% respectively.
The agriculture sector's growth was mainly dragged by sluggish oil palm, forestry and logging, fishing and rubber sub-sectors. The oil palm sub-sector contracted further to 22% from a 16.9% decline in 4Q 2019 on lower production of crude palm oil.
The mining and quarrying sector, which saw a smaller contraction in 1Q 2020 from a 3.4% decline in 4Q 2019, was slightly cushioned by improved production in crude and condensate and natural gas.
Having registered a growth of 1% in 4Q 2019, the construction sector's 7.9% contraction in 1Q 2020 marked its lowest number since 2Q 1999.
On the demand side, Mohd Uzir said private final consumption expenditure moderated to 6.7% from 8.1% in Q4 2019, while gross fixed capital formation posted a negative 4.6% against negative 0.7% in 4Q 2019. The latter saw a sharp decline in all three segments namely structure, machinery and equipment and other assets.
During the quarter, Malaysia recorded a RM9.5 billion surplus in current account balance, boosted by the surplus in goods account and smaller deficit in
primary income. This was after foreign companies' income dropped to RM16.3 billion versus RM25.1 billion in the previous quarter.
On the other hand, services account registered a wider deficit at RM8 billion as a result of fewer travel activities since the coronavirus outbreak began in January. The segment recorded a RM2.1 billion surplus in 1Q 2020 — the lowest level since 3Q 2003 due to the SARS epidemic.
"Financial accounts registered a higher net outflow of RM13.3 billion in 1Q 2020 compared with RM100 million in the previous quarter. This was primarily contributed by higher outflow in portfolio investment, due to redemption upon maturity and selling off debt securities by non-residents," said Mohd Uzir.
"Foreign direct investment (FDI) expanded to RM6.4 billion from RM5.4 billion. The FDIs were mainly from the US, Singapore and Ireland in sectors including manufacturing, financial and insurance and mining and quarrying.
"Direct investment abroad (DIA) also increased to RM3 billion from RM1.1 billion. The main destinations of DIA were the UK, Indonesia and Canada for the mining and quarrying, information and communication and agriculture sectors," he added.
On Malaysia's international investment position, Mohd Uzir said the country recorded a net asset position of RM27.1 billion, after registering nine consecutive quarters of net liabilities.
The international reserves stood at RM440 billion, compared with RM424 billion in the preceding quarter, he noted.
Other economic indicators which were highlighted by the chief statistician were
the Consumer Price Index (+0.9%), Producer Price Index (+0.6%) and export of goods (+1.1% to RM238.7 billion).
The growth in exports was contributed by refined petroleum and palm oil-related products, which increased by 43% and 4.6% respectively.
"Imports also increased by 1.3% to RM201.7 billion. By end-use category, imports of intermediate goods increased by 8.1%, followed by consumption goods, up 4.8%. However, imports of capital goods declined by 26.8%," Mohd Uzir said.
Commenting on the labour market, he said some 15.25 million people were employed in Malaysia during the quarter, up 1.6% from the previous quarter.
However, the country's unemployment rose to 3.5%, compared with 3.2% in 4Q 2019. This was mainly attributed to the adverse impact of the MCO on the labour market. According to him, the highest unemployment rate in the country was recorded at 7.4% in 1986.