2020.08.1410:22:00UTC+00Malaysia GDP Falls At Record Pace Amid Covid-19 Pandemic

Malaysia's economy shrank at a record pace in the second quarter due to the unprecedented impact of the stringent containment measures to contain the coronavirus pandemic, data from the Department of Statistics showed on Friday.

Gross domestic product dropped 17.1 percent year-on-year in the second quarter, after a 0.7 percent rise in the first quarter. This was also bigger than the expected fall of 10.0 percent.

The performance for this quarter was the lowest recorded since the fourth quarter of 1998, when GDP was down 11.2 percent, the statistical office said.

On a quarter-on-quarter basis, the economy shrank a seasonally adjusted 16.5 percent in the second quarter, following a 2.0 percent fall in the preceding period. The second consecutive decline has taken the economy into a technical recession.

The central bank downgraded its growth projections for this year as nationwide movement control order restricted production and consumption.

The economy is forecast to contract in the range of -3.5 percent to -5.5 percent this year versus previous outlook of +0.5 percent to -2 percent.

However, the economy is expected to rebound next year underpinned by the recovery in global growth and continued domestic policy measures. GDP is expected to grow 5.5 percent to 8 percent range next year.

Average headline inflation in 2020 is likely to be negative, in line with the earlier projected range of -1.5 percent to 0.5 percent, the bank said.

For 2021, headline inflation is forecast to average higher, between 1 percent and 3 percent driven by the expected recovery in global oil prices and improvement in domestic demand conditions.

The expenditure-side breakdown showed that household spending declined sharply by 18.5 percent annually, in contrast to a 6.7 percent rise in the preceding period.

Although government spending grew 2.3 percent, this was slower than the 5 percent rise posted in the first quarter.

Gross fixed capital formation fell 28.9 percent versus a moderate 4.6 percent decrease a quarter ago.

Exports and imports decreased by 21.7 percent and 19.7 percent, respectively, in the second quarter. In the first quarter, exports had declined 7.1 percent and imports by 2.5 percent.

On the production-side, all main sectors except agriculture expanded in the second quarter. Services shrank 16.2 percent and manufacturing contracted 18.3 percent. Construction output plunged 44.5 percent and mining declined 20 percent.