Malaysia’s economy contracted in the third quarter, but the Southeast Asian country’s central bank said it expects growth to rebound as coronavirus pandemic-related restrictions are eased.
Gross domestic product (GDP) in the three months ended September 30 shrank 4.5% from a year earlier, Malaysia’s central bank said Friday, worse than the 2.6% drop predicted by analysts. GDP fell 3.6% on a seasonally adjusted basis.
However, Bank Negara Malaysia (BNM) reaffirmed the government’s growth forecast for this year at 3-4% and for 2022 at 5.5-6.5%.
“The progressive lifting of containment measures and continued improvements in the labour market will be key to support the recovery going forward,” said Nor Shamsiah Yunus, BNM governor.
Monetary policy would remain accommodative to lend support and ensure price pressures are manageable, she added.
Stage Set For A Rebound
“Malaysia’s growth trajectory is expected to improve given resumption of economic activities, further improvement in the labour market, continued policy support and expansion in external demand,” said Nor Shamsiah.
Alex Holmes, Southeast Asia economist at Capital Economics, said private consumption was already bouncing back, while exporters were also set to have a much better fourth quarter.
“The stage is set for a strong rebound this quarter,” said Alex Holmes, Southeast Asia economist at Capital Economics. “With 75% of the population fully vaccinated, virus cases and hospitalisations much lower and restrictions being gradually eased, normal life is resuming.”
Further ahead, the recovery should be supported by the resumption of international travel as quarantine-free travel lanes with both Singapore and Indonesia have been announced recently.
“Recent September industrial production data suggest that disruption to industry from the virus had mostly faded by the end of last quarter,” Holmes noted.
He said the country’s loose fiscal policy would also help, with the recent 2022 budget as an example of another ramp-up in spending.
- George Russell