World Bank cuts growth forecast for Malaysia to 3.3% for 2021

KUALA LUMPUR (Sept 28): The World Bank has revised down its economic growth projection for Malaysia to 3.3% in 2021 from an earlier estimate of 4.5% in June. This is the bank's second revision.

It had predicted a growth forecast of 6% previously, but downgraded it to 4.5% to reflect a slower pathway towards suppressing the Covid-19 pandemic and a slower-than-expected vaccine rollout.

The World Bank attributed the latest downward revision to the ongoing Movement Control Orders, increased precautionary behaviour, and subdued labour market conditions are expected to weigh down further on private consumption and overall economic growth.

"This is especially so for services related sectors, which have been heavily impacted by movement restrictions," it said in a statement on Tuesday.

The revised projection also takes into account the latest data which covers the time when the Delta variant broke into the Covid-19 situation, but the World Bank expects an even more heightened recovery for 2022 as corrections will kick in.

Speaking at the World Bank’s October 2021 East Asia and Pacific Fall virtual media briefing on Tuesday, the World Bank lead economist Apurva Sanghi said the downward economic outlook revision for 2021 reflects the hard truth that the pandemic has been in charge for most of the year, leading to more severe movement restrictions in Malaysia.

Still, Apurva noted that there have been silver linings such as digitalisation having taken off in a major way, while the country’s external environment has been quite supportive to the export sector.

“Although this is not reflected in our 2021 projections, higher vaccination rates and other public health measures are enabling the economy to reopen further. Such is the basis of our projections of higher growth in 2022 and 2023,” he said, adding that the external sector will continue to provide support to the economy, especially in the exports of electric and electronic (E&E) goods and medical rubber gloves.

On the 12th Malaysia Plan, which is targeting an annual gross domestic product growth of 4.5% to 5.5% over the next five years, World Bank country manager for Malaysia Yasuhiko Matsuda deems the target “ambitious” due to the high degree of uncertainties wrought by Covid-19.

“The situations on the ground are changing weekly; almost daily, which makes it really difficult to predict how the economy would be looking even in a month or two,” he said.

“Still, we think that having a plan that articulates a long-term vision is highly appropriate and important, especially given the quality of the plan for which Malaysia is known. But at the same time, the circumstances require us to be very adaptable and nimble,” Matsuda said.

He stressed that the coronavirus will be here to stay, necessitating that both the government and society, in general, find ways of continuing with economic activities and social endeavours while minimising the impact of the virus.

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