Malaysia economy suffers worst hit since 1998 financial crisis

(ATF) Malaysia’s economy suffered its worst contraction in more than two decades last year, as the coronavirus hit businesses and the country’s key exports.

Data released by the national statistics department on Thursday (Feb 11) showed that 2020 gross domestic product shrank by 5.6%, the biggest fall since a 7.4% slump during the Asian financial crisis in 1998.

In the fourth quarter, GDP dropped by 3.4% year-on-year, after a resurgence of the virus which stemmed partly from the cramped and dismal living conditions that thousands of migrant workers were forced to endure near factories producing, somewhat ironically, vast amounts of protective gloves for medics around the world, plus other exports.

That ‘second wave’ led to authorities having to reimpose measures to curb the spread of Covid-19.

Earlier in the year, the Southeast Asian nation kept the virus in check with a promptly imposed lockdown that closed most businesses for weeks. But the second wave of the coronavirus did slightly more damage in economic terms. The total number of infections has now topped 250,000 with more than 920 deaths.

The official data showed the building sector was one of the hardest hit, down by about 20%, while net exports declined 12% despite a rebound in shipments over the last four months of the year. Revenue from agriculture was down by 2.2% while manufacturing dropped by 2.6%.

“Going into 2021, growth will rebound, supported by a pickup in global demand and normalisation in domestic economic activities,” Bank Negara Malaysia governor Nor Shamsiah Mohd Yunus said during a virtual news conference.

Malaysia’s economic performance is likely to continue to be affected by the pandemic, particularly in the first half of this year, analysts said.

“Our current assumption is that Malaysia will bring the virus largely under control by next quarter, but if that fails, we will have to cut our forecasts further,” Alex Holmes, Asia economist with Capital Economics, said. It expects full-year 2021 growth of about 7%.

Yeah Kim Leng, an economics professor at Sunway University Business School, told AFP: “The pandemic resurgence and accompanying containment measures will likely dampen the economic recovery in the first half of this year”.

With reporting by AFP, Reuters