GDP contracts record 17.1% in Q2

PETALING JAYA: Malaysia’s gross domestic product (GDP) contracted 17.1% in the second quarter of the year from a 0.7% growth in the last quarter, the lowest since the financial crisis in 1998, the statistics department announced today.

“The performance for this quarter was the lowest recorded since the fourth quarter of 1998 (-11.2%),” it said in a statement.

A total of 735 industries recorded negative growth compared with 381 in the first quarter, with a value added share of 68.5% (RM176.1 billion).

Negative growth was seen in all production sectors with the exception of the agriculture sector in Q2.

The department said the services sector recorded -16.2% growth while the manufacturing sector recorded -18.3%.

“The construction sector plummeted 44.5% while mining and quarrying declined 20%,” it added.

The tourism sector was among the worst hit, while the food and beverage and accommodation services, travel agency, transport, conference hosting, recreation and sport industries were also affected due to the travel restrictions and closure of national borders.

Only 260 industries recorded positive growth compared with 617 in Q1, with a value-added share of 31.4% (RM110.2 billion).

“Other indicators such as sales and vehicle registrations declined sharply in April and May, which impacted the performance of the motor vehicle segment in Q2,” it said.

Chief statistician Mohd Uzir Mahidin said despite the negative GDP, monthly GDP estimates showed improvements, with the GDP for June climbing to -3.2% from -19.5% in May.

He said the GDP contracted the most in April at -28.6%.

“The slower contraction in June was observed in all sectors, especially manufacturing and agriculture, which posted a positive growth of 4.5% and 11% respectively, while other sectors (construction: -12.7%, mining and quarrying: -16.4% and services: -6%) posted slower contractions,” he said,

On demand, all final demand components declined except for government final consumption expenditure, which recorded a positive growth of 2.3%.

“Private final consumption expenditure decreased 18.5%, gross fixed capital formation contracted 28.9%, exports dropped 21.7% while imports declined 19.7%,” said Uzir.

Nonetheless, Malaysia’s export performance indicated a recovery from the impact of the Covid-19 pandemic in June, registering a positive growth of 8.8% to RM82.9 billion, resulting in a RM20.9 billion trade surplus – the largest value ever recorded.

“In May, Malaysia’s trade contracted 27.8% year-on-year,” said Uzir, adding that the GDP was affected by movement restrictions and a weaker external sector due to the spread of Covid-19 in 210 countries.

Lethargic global demand also affected the production of goods for export-oriented industries, which declined 13.5%.

Total trade for Q2 declined 14.7% compared with the previous corresponding quarter, registering 7.9 million transactions against 11.4 million transactions a year ago.

On the workforce market, Uzir said labour utilisation had yet to reach optimum levels as business operations only recently resumed following the implementation of the movement control order (MCO).

“The slower performance of production due to lower labour demand has impacted the labour market. The number of employed persons in Q2 declined 1.3% to 14.88 million people compared with the previous corresponding period,” he said.

“In this situation, the smaller reduction in employed persons against a significant decline in GDP is seen as a positive impact of the implementation of various initiatives by the government, among them, the wage subsidy programme to ensure employee retention.

“Although businesses are keen on using technology, most economic activities are still labour-intensive.

“This is reflected in the present labour market situation where more than half of jobs and vacancies are in the semi-skilled category.

“Furthermore, 48.4% of employment is in SMEs. Given this, remote working or working from home during the MCO was a challenge since businesses required some time to adjust to the new norm.”

Despite growth contractions in most economic sectors, Uzir said the economy was showing signs of recovery in line with the reopening of business activities under the conditional movement control order.

“The implementation of stimulus packages such as Pakej Rangsangan Ekonomi Prihatin Rakyat (Prihatin), Pelan Jana Semula Ekonomi Negara (Penjana) and the short-term economic recovery plan to cushion the Covid-19 impact is expected to further alleviate the situation and gradually push the economy up in the third quarter,” Uzir added.