Malaysia's GDP slump likely to ease in Q1 on rising exports

[KUALA LUMPUR] The Malaysian economy should see a less severe slump in the first quarter of 2021 than it did in the previous three months, helped by resilient manufacturing activity and growing external demand, according to economists polled by Reuters.

The economy is seen contracting 1.9 per cent in the period of January to March, according to the median estimate of a Reuters poll of 11 economists, an improvement on a 3.4 per cent contraction recorded in the fourth quarter of last year.

Malaysia's economy was propped up by robust growth in the manufacturing sector and sustained oil production, but lockdowns imposed to contain spiking coronavirus cases over the quarter will have hurt consumption, according to Alex Holmes, Asia economist for Capital Economics.

"The outlook has deteriorated again in recent weeks, with a rebound in cases leading to the reimposition of restrictions," Mr Holmes said in a research note.

"The risks to our annual forecast to growth of 6.5 per cent are now weighted firmly to the downside." Shipments surged in March by 31 per cent year-on-year, the seventh-straight month of growing demand for Malaysia's exports.

But this week the government imposed movement restrictions in capital city Kuala Lumpur and most parts of surrounding Selangor state, Malaysia's richest region, to deal with a fresh surge in Covid-19 cases.

Malaysia's central bank expects the economy to rebound this year with growth of between 6 per cent to 7.5 per cent. GDP shrank 5.6 per cent in 2020 - its worst annual performance since the Asian Financial Crisis.

But the "disappointingly slow" pace of the government's coronavirus vaccine rollout will likely crimp growth, Barclays economist Brian Tan said.

The government has set a December target to vaccinate 80 per cent of Malaysia's 32 million population. Nearly 992,000 people had received at least one vaccine dose as of Wednesday.

"At its current pace, we estimate it would take another four years to provide at least one dose to 80 per cent of the population," said Mr Tan, who expects Malaysia's economy to expand 5.5 per cent this year.

REUTERS