Malaysia’s economy has improved to record a small contraction of -2.7% in the third quarter of 2020, a big rebound compared to the -17.1% decline earlier in Q2.
On a quarter-on-quarter seasonally-adjusted basis, the economy had turned around in Q3 to register an expansion of 18.2% in growth domestic product (GDP). Breaking it down to a monthly basis, the GDP growth for July was -2.7%, -3.6% in August, and -1.6% in September.
“The improvement largely reflected the reopening of the economy from Covid-19 containment measures and better external demand conditions,” Bank Negara Malaysia (BNM) said in a statement. “Improvements in growth were seen across most economic sectors, particularly in the manufacturing sector, which turned positive following strong E&E production activity. On the expenditure side, domestic demand contracted at a slower pace, while net exports rebounded.”
The economic contraction in Q2 had been the worst in the nation since the 1998 Asian Financial Crisis. With Q3’s ensuing contraction, the Malaysian economy can now be considered to be in a technical recession as it has reached two consecutive quarters of negative growth. Earlier in Q1, the country’s GDP was still positive at 0.7% growth, although meagre compared to the GDP of previous years: 4.5% in Q1 2019, 5.2% in Q1 2018, and 5.6% in Q1 2017.
For the final quarter of the year it is expected that the recent resurgence of Covid-19 cases and targeted containment measures could affect the momentum of economic recovery. “However, as most economic sectors have been allowed to continue to operate subject to compliance with standard operating procedures (SOPs), the impact is expected to be less severe compared to the containment measures during previous periods,” BNM stated.
Going into 2021, the Malaysian economy is predicted to improve further in tandem with better global demand, a turnaround in public and private sector expenditure, and domestic policy support. Additionally, BNM said, the continued financial measures and low interest rate environment are also expected to lend further support economic activity.