Malaysia’s GDP likely to contract by 5.2% in September quarter

Overseas demand and domestic spending are expected to have revived domestic income

by HARIZAH KAMEL / pic by BERNAMA

MALAYSIA’S GDP is expected to contract by 5.2% in yearly terms in the September quarter following a 17.1% decline in the June quarter.

According to Moody’s Analytics Asia Pacific Economic Preview for the week of Nov 9-13, the sharp contraction in the June quarter came as the strict movement restrictions due to the pandemic eroded domestic consumption and fixed investment.

Concurrently, large-scale shutdowns across major economies weighed heavily on Malaysia’s external position.

“Since then, however, overseas demand has picked up along with domestic spending as the localised outbreak was brought under control. These factors are expected to have revived domestic income in the September quarter,” it said.

Separately, a note by AmBank Research last month stated that the country’s GDP is expected to rebound strongly in the third quarter of 2020, with a contraction of between -3.5% and -4.5%.

It said the full-year’s GDP is expected to hover between -3.6% and -5.5%, taking into account the second wave of the Covid-19 pandemic and stimulus measures introduced, adding that much of the downside risk depends on external challenges besides domestic noises.

On other countries’ GDP in the Asia Pacific, Moody’s said the Philippines is likely to have contracted by 6% in yearly terms in the September quarter following a 16.5% decline in the prior quarter.

Much like Malaysia, the Philippines’ economy contracted sharply during the June quarter, as the strict lockdown weighed heavily on domestic investment and consumption, while exports plunged by 40%.

“Unlike Malaysia, however, domestic Covid-19 caseloads in the Philippines accelerated over the September quarter, necessitating the extension of conditional restrictions. The surge in domestic cases is expected to have dampened the revival in domestic demand, giving rise to another quarter of contraction,” it said.

India’s industrial output is likely to have declined by a narrower margin of 6.5% in yearly terms in September following an 8% decline in August.

Domestic production has continued to revive in India following one of the strictest and longest lockdowns in the region, and overseas demand has improved in recent months as exports surged by 6% in yearly terms in September.

The gradual pickup in demand is expected to have supported the revival in industrial activity.

It also pointed out that Indonesia’s GDP contracted by 3.5% in yearly terms in the September quarter following a 5.3% decline in the prior quarter.

“The strain on all components of demand eased, with private consumption contracting by 4% in yearly terms, while gross fixed investment declined by 6.5%. Exports declined by 10.8%, but a 9.7% increase in government spending helped cushion the net decline,” it added.