Malaysia’s economy contracted in the year 2020 at the fastest pace since the 1998 Asian financial crisis as the coronavirus pandemic weighed on household spending and investment, data from the Bank Negara Malaysia showed on Thursday.
In 2020, gross domestic product was down 5.6 percent, in contrast to the 4.3 percent expansion posted in 2019. The latest decrease was the largest since 1998.
Due to the second wave of infection, GDP dropped at a faster pace of 3.4 percent annually in the fourth quarter, after easing 2.6 percent a quarter ago. This was the third consecutive fall and bigger than the economists’ forecast of -3.1 percent.
Quarter-on-quarter, GDP logged a decline of 0.3 percent after a sharp 18.2 percent rebound in the third quarter.
The central bank said near-term growth in 2021 will be affected by the re-introduction of stricter containment measures, however, the impact will be less severe than that experienced in 2020.
Growth is forecast to improve from the second quarter driven by the recovery in global demand.
Although the government is set to start easing Covid-19 restrictions slowly from next Wednesday, GDP is likely to decline much more sharply in the first quarter of 2021 than seen at the end of last year, Alex Holmes, an economist at Capital Economics, said.
As the GDP data was weaker-than-expected, the economist downgraded growth outlook for this year to 6.5 percent from 7 percent.
The expenditure-side breakdown showed that private consumption fell 3.4 percent, while government spending grew 2.7 percent in the fourth quarter. Private investment was down 7 percent.
Exports were down 1.8 percent and imports dropped 3.3 percent in the fourth quarter.
Headline inflation declined to -1.5 percent partly due to the larger decline in retail fuel prices in the fourth quarter as compared to the corresponding period last year, the central bank said. Core inflation moderated to 0.8 percent due mainly to lower inflation for communication services and rental.
The average headline inflation was at -1.2 percent in 2020 on weak global oil prices. For 2021, headline inflation is projected to average higher, reflecting higher oil prices.
In the fourth quarter, the current account surplus fell to MYR 18.96 billion from MYR 26.09 billion in the third quarter.