KUALA LUMPUR: The Malaysian Institute of Economic Research (MIER) is revising downwards its real gross domestic product (GDP) projection in 2020 for Malaysia to -5.5% amid a confluence of factors that weigh on the economy.
The think tank said the projection was based on a deep decline of economic growth rate in the second quarter of -17.1%, the resurgence in Covid-19 cases and the re-implementation of the conditional movement control order (CMCO), as well as the absence additional government mitigation measures for the last quarter, especially for midsize small and medium enterprises (SMEs).
GDP for the third and fourth quarters of 2020 would have been expected to register a positive growth of between 2.0% and 2.5%, largely depending on the effectiveness of the stimulus packages of Prihatin and Penjana, said MIER in a statement today.
Meanwhile, unemployment is expected to remain stable from the impact of the Prihatin and Penjana stimulus packages, should the loan moratorium remains in place until year-end to support SMEs, including the larger ones in terms of employment at between 3.7% and 4.5%.
“Although the GDP growth reduced significantly in the second quarter of 2020 by -17.1%, the unemployment rate showed declining trends,” said MIER.
For 2021, MIER maintained its forecast of real GDP growth rate of 5.2-6.7%, taking into account projections from its “Crouching Tiger Initiative” and the launch of the 12th Malaysia Plan early next year.
“But, as the flattening of the pandemic had taken six months in the first wave, we expect the flattening of this third wave to take at least the same amount of time and will delay the recovery to first quarter of 2021,” it added.
While factoring in world prospects due to the Covid-19 pandemic for growth, trade and investment, the main downside risk to the projection for the economy remains the current surge of the pandemic, said MIER.
It noted that if the proposed national emergency to counter the new Covid-19 resurgence in the third quarter were enforced, it would have tanked the economy this year, and would further delay its recovery next year.
“While that proposal had been rejected, the pandemic remains the major downside to the speed of economic recovery in 2021, and threatens to turn a V-shaped reversal into a U-shaped one,” said MIER. – Bernama
