Malaysia’s 2020 GDP shrunk 5.6pc, biggest fall since 1998 Asian Financial Crisis

KUALA LUMPUR, Feb 11 — The country’s total output for 2020 contracted by 5.6 per cent, Bank Negara Malaysia and the Department of Statistics announced today, higher than the Ministry of Finance's initial estimate of -4.5 per cent.

This drop, compared to the gross domestic product (GDP) of 2019, was the biggest decline since the 1998 Asian Financial Crisis, as negative growth in the fourth quarter of 2020 affected by Covid-19 and the movement control order (MCO) continues to weigh on the county’s recovery.

GDP growth in the last three months of 2020 stayed in the negative zone, at -3.4 per cent compared to the previous quarter, albeit still an improvement from second quarter’s record -17 per cent. All but one key economic sector posted growth in the period.

Manufacturing output, while slightly lower than the previous quarter, grew 3 per cent underpinned by robust external demand for electric and electronic products.

Services, agriculture, mining, and construction all fared poorer for the October-December period, with mining and construction sectors posting double digit negative growth at -10.6 and -13.9 per cent respectively, against -6.8 and -12.4 per cent from the months before.

Subdued demand remained the underlying factor as the third wave of Covid-19 infections that started October kept the job market volatile and forced consumers to spend less.

“Private consumption remains in contraction, weighed down by weak income conditions and tighter movement restrictions,” DoSM chief statistician Datuk Seri Mohd Uzir Mahidin said at the media briefing.

Fourth quarter consumer spending shrank 3.4 per cent against -2.1 per cent in the previous period while private investment improved slightly to -7 per cent compared to -9.3 per cent in the third quarter.

Employment data also remained weak contracting sharper in the October-December period after improving slightly between July and September.

Jobs growth shrank 0.4 per cent in October and dipped further to -0.8 per cent in November but recovered slightly in December. The government reintroduced tighter restrictions during the three months after Covid-19 cases began to spike.

Unemployment in the fourth quarter stayed at 4.8 per cent in December and November, up 0.1 percentage point from October.

BNM governor Datuk Nor Shamsiah Mohd Yunus said the labour data should be a cause for alarm for policymakers, citing the need for “greater focus” to tackle soaring unemployment. 

“A key area that warrants greater focus is the labour market. Based on available indicators, the imposition of CMCO in October 2020 has resulted in the unemployment rate climbing to 4.8 per cent in the fourth quarter,” she said.

Jobless claims jumped 4.6 per cent at the onset of the CMCO in October before tapering slightly to 4.5 and 3.5 per cent in November and December.

The labour market is expected to remain weak for the first half of this year before gradually improving by the second half on the back of recovery in global trade, Shamsiah said.

BNM has maintained its 2021 growth projections on optimism that vaccination would speed up global recovery.

Analysts estimate global GDP to grow 5.5 per cent and 8.1 per cent for global sales of trades and goods on hopes that governments would reopen their borders as more people get vaccinated.