BNM: Malaysia GDP contracted 17.1% in 2Q20, worst decline since 4Q98

KUALA LUMPUR (Aug 14): Malaysia’s gross domestic product (GDP) contracted by 17.1% in the second quarter of 2020 (2Q20) mainly due to the movement control order (MCO) enforced during the quarter to stem the spread of Covid-19, Bank Negara Malaysia (BNM) said.

Chief Statistician of Malaysia Datuk Seri Dr Mohd Uzir Mahidin, who spoke during BNM’s 2Q20 GDP virtual briefing today, said the contraction for the quarter was the lowest growth ever recorded by the nation since the 11.2% contraction recorded for the fourth quarter of 1998, during the Asian Financial Crisis.

For comparison, Malaysia recorded growth of 4.5% in 1Q19.

“The sharp decline in GDP for this quarter was due to the three phases of the MCO and CMCO (Conditional Movement Control Order) implemented to curb the spread of Covid-19 in Malaysia. The capacity constraints due to the restriction imposed during the lockdown had affected growth in the services, manufacturing and construction sectors,” said Mohd Uzir.

All sectors recorded negative growth during the quarter, except for the agriculture sector, which grew 7.2%. The services sector declined 17.4%, while manufacturing dropped 17.9%.

Looking at GDP contraction by component, the construction sector recorded the biggest decline at 44.5%, followed by mining and quarrying (-20%), manufacturing (-18.3%) and services (-16.2%). The declines were slightly offset by 1% growth recorded by the agriculture sector.

Meanwhile, domestic demand declined 18.7% during the quarter. Private consumption and investment declined by 18.5% and 26.4% respectively.

For the public sector, consumption grew 2.3%, although investment fell 38.7%. Exports fell 21.7% while imports contracted 19.7%.

In terms of inflation, BNM governor Datuk Nor Shamsiah Yunus said the 2.6% decline in headline inflation was due to the substantially lower retail fuel prices and implementation of the tiered electricity tariff rebate beginning in April.

In terms of broader prices, she said the central bank is seeing signs of price normalisation as the economy slowly reopens. The share of CPI items recording price increases rose from 10% in April to 44% in June, she noted.

“It has always been our expectation that growth during the quarter will be weak. This reflects the outcome of the strict domestic containment measures during the quarter that were necessary to contain the pandemic and limit more prolonged disruption in the economy.

“Although the economy was significantly affected by the global and domestic containment measures, the gradual reopening of our economy from May 4 onwards provided some relief to the economy. In fact, we have seen some signs of recovery already taking place,” said Nor Shamsiah.

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