KUALA LUMPUR, Feb 15 — Malaysia’s real gross domestic product (GDP) growth for 2021 is now forecast to be just 4.9 per cent versus the 10.0 per cent projected earlier, said Fitch Solutions Country Risk & Industry Research.

The Fitch Group unit said it was slashing the projection due to the third wave of Covid-19 infections, which began following the Sabah state election last year and continued to build to the point of requiring a renewed movement control order (MCO) in January.

Fitch Solutions noted that Malaysia’s economy also fared worse in 2020 than it had predicted, contracting by -5.6 per cent for the full year instead of its forecast of -4.9 per cent.

"This revision follows the realisation of the downside risks we had pointed out in our comprehensive update on the growth, fiscal and monetary outlooks for Malaysia after the government had implemented lockdown measures to combat the third wave of Covid-19 infections. 

"We expect a further extension of lockdown measures, and do not rule out further downward revisions to our growth forecast over the coming months,” Fitch Solutions said in a research note today.

Fitch Solutions explained that the MCO has severely curtailed domestic demand and would cause a renewed spike in unemployment as businesses faltered.

Fitch Solutions noted that Malaysia’s economy fared worse in 2020 than it had predicted, contracting by -5.6 per cent for the full year instead of its forecast of -4.9 per cent. — Picture by Hari Anggara

The recovery of the tourism sector — a key contributor to Malaysia’s economic growth that has effectively been in stasis over most of 2020 — has also been derailed.

Fitch Solutions further said the government would be limited in its ability to respond due to the fiscal constraints it was already facing.

Malaysia’s economy was consequently likely to be in for further consequences, according to Fitch Solutions that predicted a further deterioration in coming weeks.

While the MCO has had some effect in controlling the spread of the third wave, the research house noted that Malaysia’s Covid-19 situation remained dire and predicted that the government would keep up some restrictions beyond February 18 when the MCO is due to expire.

Such restrictions would continue to weigh on the prospects of recovery, it said.

"Moreover, Malaysia appears to be falling behind in terms of a vaccine rollout, with Channels New Asia reporting on February 1 that the country will only receive its first batch of 1 million vaccines only on February 26, when other countries such as Singapore and Indonesia have already launched their vaccination drives in January.”

Prime Minister Tan Sri Muhyiddin Yassin will launch the National Covid-19 Immunisation Plan tomorrow.

The third wave of Covid-19 infections attributed to the Sabah state election last year has resulted in over 250,000 cases in Malaysia, which had up to that point only amassed around 10,000 cases.