Malaysia’s GDP contracts 0.5% in 1Q21 

by ASILA JALIL

 

Malaysian recorded a smaller contraction in gross domestic product (GDP) at -0.5% in the first quarter of 2021 (1Q21) compared to 3.4% in 4Q20 despite the imposition of the second Movement Control Order (MCO2.0).

The contraction was mainly supported by less stringent containment measures as economic sectors were allowed to operate during the movement restriction as well as better external demand. 

Headline inflation in the quarter increased to 0.5% mainly due to base effect from fuel prices and lapse in impact from electricity tariff rebates. 

Bank Negara Malaysia governor Datuk Nor Shamsiah Mohd Yunus said the headline inflation is expected to average between 2.5% and 4% this year due to the cost-push factor of higher global oil prices, while core inflation to remain subdued. 

“Headline inflation is projected to temporarily spike in 2Q mainly due to base effect from domestic retail fuel prices in the quarter.  

“More specifically for the months of April and May, headline inflation may rise to approximately between 6.5% and 7%. However this will be transitory as headline inflation is expected to moderate below 5% in June and continue to moderate after as this base effect dissipates,” she said in a virtual press conference today.

Shamsiah had previously said the Malaysian economy is projected to expand between 6% and 7.5% in 2021 compared with a contraction of 5.6% in 2020, supported by both external and domestic factors fuelled by vaccine rollout.