THE economy contracted 2.7% in the third quarter, the second consecutive negative growth quarter after Q2’s -17.1% at the height of the movement-control order (MCO).
However, the growth trajectory for 2021 remains on track despite a resurgence of the coronavirus and containment measures, Bank Negara 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.”
Indicators suggest underlying domestic economic activities are on a recovery path from the trough in April, she said during a briefing yesterday.
Nor Shamsiah said the current conditional MCO is more targeted and has better mobility compared with the previous one in May-June, hence, the impact would not be as bad as before.
Thus far, consumer spending remains good, she said.
The positive growth during the CMCO period could be attributed to an increasing number of merchants using cashless terminal, 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 procedure and contact tracing (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 transfer to affected households are gaining traction in supporting the economy, she said.
“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.”
BNM earlier forecast a growth of 5.5% to 8.0% in 2021, while the Ministry of Finance (MoF), in its latest economic outlook, gauged the economy to grow between 6.5% and 7.5% next year.
She attributed MoF’s better outlook on the export sector as the latest data were much better than anticipated.
The Statistics Department said Malaysia’s exports grew 13.6% 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 September, it said.
Last month, the International Monetary Fund said global growth is projected at -4.4% for 2020, an upward revision of 0.8% 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.
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 Prihatin stimulus package and targeted repayment assistance would also support public consumption.