The impact of the coronavirus pandemic on the Malaysian economy may be worse and last longer than previously expected, according to economists with the Kuala Lumpur-based HELP University. The country’s GDP shrank by 0.7% year-on-year in the first quarter. Meanwhile, a survey by Bloomberg projected Malaysia’s GDP to contract by 2.7% in 2020 before rebounding to a 5.2% expansion in 2021.
However, the economists said that new data pointed to a deeper contraction of 7.1% in 2020, followed by a modest rebound of 3.6% in the following year. This forecast was based on 32.0% year-on-year contraction in industrial output, 23.8% drop in exports, 5% unemployment rates, and headline deflation of 2.9%. All of these figures were defying market expectations by significant margins.
The economists also doubted that would immediately return to usual 4-5% annual growth. They said Malaysia’s GDP could gain traction to expand at those rates until 2022 at the earliest. The country is also expected to see deflation of 2.5% during 2020 with 2.0% inflation expected only by 2021. They also expect overall investment to contract by about 20% this year which can weigh on the economy over the long term.
As a reference, the Asian Development Bank (ADB) projects Malaysia’s GDP to contract by at least 4.0% in 2020. ADB also expects a deflation of 1.5% this year.
