Research house says the economy shrank by 4.8%

The economy is expected to gradually improve, though risks remain, says MIDF Research

KUALA LUMPUR: A financial research house has forecast that Malaysia will record a stronger depression this year than it had projected earlier.

MIDF Research revised its 2020 GDP forecast to minus 4.8% compared to the previous year, after having earlier predicted that the GDP would record a contraction of 2.1%.

Bernama reported that the agency said the economic fallout in the second quarter of this year was significantly worse than predicted.

In a note today, the research house said that, based on current developments and indicators, the economy is set to improve on a gradual term as sentiments were still weak due to the uncertainty over Covid-19, with other downside risks emerging such as the political situation, rising protectionism and geopolitical tensions.

“Some countries are witnessing the resurgence of Covid-19 cases which caused them to reinstate lockdowns or retract plans to reopen.

“Domestically, the rise in Covid-19 is very localised thus far. However, fears of the adverse situation abroad being echoed in Malaysia is still present,” it said, Bernama reported.

MIDF Research said the country’s border which remained shut and the high unemployment (which affects private consumption, the biggest driver of the economy) also contributed to the downward revision.

Nevertheless, it said the stimulus packages and interest rate cuts in the overnight policy rate would likely cushion some of the adverse impacts.

Bank Negara Malaysia today announced that Malaysia’s GDP fell 17.1% in the second quarter this year, compared to the previous year, a far worse result than market expectations. It was the lowest fall ever recorded since the Asian Financial Crisis, when the GDP shrank by 11.2% in the fourth quarter of 1998.

The central bank said the GDP contraction arose mainly from the nationwide lockdown from March to July, with strict restrictions on public activity to safeguard public health and safety.