by LYDIA NATHAN / pic by TMR FILE

MALAYSIA’S economic recovery could be dampened with the rise of Covid cases, and the GDP forecast may be revised down according to Moody’s Analytics.

“Our preliminary estimate for September-quarter yearly GDP growth reflects a downwardly revised view of economic conditions. We forecast full-year GDP of 4.7% in 2021, but in light of the fluid COVID-19 situation in Malaysia, the annual GDP forecast will likely be subjected to further downward revision in September,” Moody’s Analytics said.

“The road to recovery is a protracted one and Malaysia lacks the ammunition to go into a third month of lockdown in August. Bank Negara Malaysia revised its GDP growth projection for 2021 to 3% to 4%, down from 6% to 7.5% previously,” it added.

Malaysia has seen an increase of 16.1% year-on-year (YoY) in its gross domestic product (GDP), the first expansion after four consecutive quarters of contraction.

According to Moody’s Analytics, the economy was showing signs of recovery thanks to resilient foreign exports and moderately good retail sales early in the second quarter, but a late surge in Delta-variant COVID-19 cases disrupted that momentum.

“The arrival of the highly contagious Delta variant of Covid-19 is making it more onerous to keep infection rates under control. Record-high case numbers and nationwide restrictions have undermined any economic recovery,” it said in a report.

According to Moody’s Analytics, Malaysia’s June 2021 trade performance was on the upside, as exports grew undeterred by the movement control orders, increasing by 37.4% YoY.

It added despite the lockdown and a 60% production gap on manufacturing, both exports and imports recorded double-digit monthly growth in June from May.

“Exports have been a lifeline for Malaysia, it is the country’s top priority to safeguard manufacturing and foreign trade to buoy the sluggish domestic economy in the second half of the year.”

“The high trade surplus, supported by higher global oil prices, has placed Malaysia among the top of its Asian peers in terms of trade performance. However, continued gains from net trade will crucially depend on the stability of global demand against the backdrop of the intensifying Delta-variant surge,” it noted.

Meanwhile, Moody’s Analytics said government consumption increased 9% YoY for the second quarter, despite policymakers struggling to strike a balance between pandemic control measures and economic recovery, with a step-up in fiscal spending over this period contributing to the quarterly government consumption expansion.