Malaysia’s economy shrank 4.5% in the third quarter, contracting by more than expected after its rebound in the second quarter, but the central bank expects a quick recovery as coronavirus restrictions are eased and economic activities resume.
The third quarter performance was markedly worse than the median forecast for a 1.3% year-on-year contraction from a Reuters poll of economists.
But Bank Negara Malaysia (BNM) said recent indicators suggested a more positive momentum going forward.
A pickup in production and construction activities, an improved labour market, and strong external demand would all support a recovery, the central bank said, projecting economic growth between 5.5%-6.5% in 2022.
“The growth outlook remains subject to COVID-19 risk factors globally and domestically, stabil-ity in global financial markets and gradual easing of supply chain disruptions,” BNM Governor Nor Shamsiah Mohd Yunus cautioned during a news conference.
Malaysia is also set to benefit from strong growth among its major trading partners such as China and the United States, high-er commodity prices, and robust demand for semiconductors to cater for remote work equipment and business digitalisation, she said.
A surge in COVID-19 cases and the reimposition of movement curbs have weighed on consumption and investment activity, with the central bank cutting the country’s growth outlook for 2021 to 3%-4% in August.
Coronavirus infection rates, however, have slowed drastically in recent weeks amid a ramped-up vaccination programme, boosting hopes of a turnaround. More than three-quarters of Malaysia’s 32 million population are fully vaccinated.
The Southeast Asian country will likely see a strong rebound in the fourth quarter, with a resumption in international travel expect-ed to boost recovery, Capital Economics analyst Alex Holmes said in a note.
Malaysia this week announced quarantine-free travel lanes with neighbouring Singapore and Indonesia, and expects to re-open its borders further by Jan. 1 at the latest.
Malaysia’s economy slumps in Q3, outlook sunnier as pandemic’s impact fades
