Economy seeing ‘green shoots’ since June, says Zafrul

Tengku Zafrul Aziz says the brunt of the MCO was felt in April when the GDP contracted by 28.6% from a year ago.

PUTRAJAYA: The economy has started to show “green shoots” since June with the gradual opening of businesses since May 4, after being battered by the Covid-19 pandemic, said Finance Minister Tengku Zafrul Aziz.

He said the brunt of the national shutdown under the movement control order was felt in April when the gross domestic product contracted by a whopping 28.6% compared to the year before.

Malaysia imposed the MCO on March 18, which was eventually eased in May and June during which the economy was gradually opened up.

“However, in May, the GDP was minus 19.5% and in June, it was a smaller contraction of 3.2%, which was a sharp upswing as businesses had started operating,” Zafrul told Bernama and TV3 today.

“In cumulative, the second-quarter GDP dipped 17.1% as the country went into a lockdown with strong enforcement to stem the spread of Covid-19.

V-shaped recovery from May

“We are seeing a V-shape recovery starting May. Hence, June is a good barometer to show the economy is improving.”

“We hope the economy will continue to improve in the third and fourth quarters of the year,” he said.

He said month-to-month comparisons would show the improvements: the unemployment rate in June declined to 4.9% from 5.3% in May, while the Industrial Production Index rebounded 26.2% in June from May, and wholesale and retail sales grew 21.8% in June compared with the previous month.

Malaysia’s manufacturing Purchasing Managers’ Index recovered strongly from 31.3 in April to above 50.0 in June and July, indicating that the sector has moved past the MCO period of contraction.

Consumer spending has also improved, with a 6.3% increase in passenger car sales in June, compared to last year.

Malaysia’s GDP for 2020 is forecast to contract by 3.5% to 5.5% but is expected to recover and post a growth of 5.5% to 8% next year, with the national economic stimulus packages expected to contribute more than 3% to GDP growth this year.

IMF predicts 6.3% growth next year, World Bank says 6.9%

For the 2021 outlook, he said the International Monetary Fund had projected the Malaysian economy to grow at an average of 6.3% while the World Bank expected 6.9% growth.

Zafrul said later that Malaysia’s financial system fundamentals were still strong.

“Unlike during the global financial crisis in 2008-2009, the Malaysian banking system entered this challenging episode from a position of strength” with a capital buffer of RM121 billion, more than three times the level during the global financial crisis.

Ample liquidity, coupled with sound asset quality and a robust risk management framework, has continued to support lending activities and the overall economy, he said.

“We are now in the recovery phase and in the midst of preparing for the revitalise phase, which will be presented in the upcoming Budget 2021 announcement, scheduled for November, he said.