Malaysia braces for 5th consecutive GDP contraction

According to an analyst, the economic contraction is likely to be between 5% and 8% greater in the second quarter of 21, compared to a 0.5% decline in the first quarter of 21

by SHAHEERA AZNAM SHAH / image by TMR FILE

MALAYSIA could see its fifth straight quarter economic contraction in the second quarter (Q2 21) due to the implementation of a full lockdown, falling short of the government’s optimistic growth forecasts.

After efforts to reduce positive Covid-19 cases through the Third Movement Control Ordinance (MCO 3.0) failed, the government announced that “Full closure” More businesses are forced to shut down temporarily to alleviate rising cases while public health is given some time to stockpile its equipment.

Mai, Malaysia hit the highest daily number since the pandemic began at 9,020, increasing the need for ventilators and beds in the intensive care unit and increasing pressure on the public health system.

The Assoc-Professor Dr. Ahmed Razman Abdul Latiff of Putra Business School said the economic downturn in Q2 21 is likely to be greater than the 0.5% decrease in Q1 21 Decrease of 5% and 8%.

“I think Malaysia could avoid the collapse of the economy like last year because this time many companies have prepared themselves well by changing their business model towards digitization and automation.

“Also this time some sectors are allowed to go live and when the government announces its latest stimulus package, the parties concerned will get the support they need.

“However, I think the central bank needs to revise its forecast of 6% to 7.5% economic growth. Based on the latest situation, a realistic target should be around 5%, ”he told The Malaysian Reserve (TMR).

The government announced last Friday that the full lockdown would be extended by another two weeks until Jan.

However, senior minister (safety cluster) Datuk Seri Ismail Sabri Yaakob said Sunday that the government can review Standard Operating Instructions (SOPs) for MCO 3.0 if daily cases drop below 4,000 – based on a target set by the Ministry of Health (MoH).

Universiti Kuala Lumpur Business School Business Analyst, Assoc.

“The lockdown of MCO 3.0 does not fully encompass MCO 1.0 practices as companies in the critical areas have fully understood the importance of complying with SOPs.

“These important manufacturing companies are only allowed to work with 60% of their employees present. If new clusters continue to emerge from the identified major manufacturers, a complete shutdown will certainly be carried out.

“I think last year’s decline in GDP growth of 17.1% will not be repeated. However, the recovery of the domestic economy is being hampered again and could easily keep real GDP growth in negative territory, ”he told TMR.

Aimi Zulhazmi said while the country Unemployment rate fell slightly to 4.8% of the total labor force in February, it will be difficult to maintain the positive course with the lockdown.

“Unemployment should improve. However, it will be difficult to maintain this improvement as the economy is slowly growing again.

“Many of the small and medium-sized enterprises (SMBs) that have been about to transition to the positive are now having to rethink their business strategies as the recovery will take longer than expected.

“The aid announced in Pemerkasa + would only help to extend its lifespan, but without concrete plans by the government for long-term solutions, the future of the affected economic sectors will look uncertain,” he said.

Ahmed Razman believes the country’s unemployment rate will remain high and is expected to top 4.8% in June.

“The number of people in employment could also decline and the number of self-employed people will have a more negative impact.

“But it won’t be a drastic change due to a government decision to allow some sectors to open,” he said.

On the other hand, despite the lockdown, Malaysia’s economy will be bailed by continued export demand for electrical and electronic products, palm oil, gloves and good oil prices, which will be a big contributor to GDP, Aimi Zulhazmi said.

“This time, the approach looks more at the health balance and tries to curb the rapidly increasing daily infection rates, thereby shaking economic problems and only critical sectors are allowed to work with a minimum of personnel.

“The aim is to reduce people’s movement and theoretically stop the infection from spreading continuously.

“It is also followed by MCO 1.0, which has been seen as successful in bringing cases to zero.”

source https://dailyhealthynews.ca/malaysia-braces-for-5th-consecutive-gdp-contraction/