THE World Bank has revised down Malaysia’s GDP growth for 2021 to 3.3 percent compared to earlier forecast of 4.6 percent.
In a report today, it said that the movement control orders, increased precautionary behaviours and subdued labour market conditions will drag down private consumption and local economic growth in general.
Additionally, World Bank also noted that the East Asia and Pacific region’s recovery has been undermined by the spread of the COVID-19 Delta variant, prolonging the distress for firms and households, likely slowing economic growth and increasing inequality.
Economic activity began to slow down in the second quarter of 2021, and growth forecasts have been downgraded for most countries in the region, according to the World Bank’s East Asia and Pacific Fall 2021 Economic Update.
While China’s economy is projected to expand by 8.5%, the rest of the region is forecast to grow at 2.5%, nearly 2 percentage points less than forecast in April 2021.
Employment rates and labor force participation have dropped, and as many as 24 million people will not be able to escape poverty in 2021.
“The economic recovery of developing East Asia and Pacific faces a reversal of fortune,” said World Bank Vice President for East Asia and Pacific Manuela Ferro. “Whereas in 2020 the region contained COVID-19 while other regions of the world struggled, the rise in COVID-19 cases in 2021 has decreased growth prospects for 2021. However, the region has emerged stronger from crises before and with the right policies could do so again.”
The damage done by the resurgence and persistence of COVID-19 is likely to hurt growth and increase inequality over the longer-term, the Update finds. The failure of otherwise viable firms is leading to the loss of valuable intangible assets, while surviving companies are deferring productive investments. Smaller companies have been hit the hardest. While most firms have faced difficulty, larger firms are likely to see a smaller decline in sales and more likely to adopt sophisticated technologies and receive government support.
“Accelerated vaccination and testing to control COVID-19 infections could revive economic activity in struggling countries as early as the first half of 2022, and double their growth rate next year,” said East Asia and Pacific Chief Economist Aaditya Mattoo.
“But in the longer term, only deeper reforms can prevent slower growth and increasing inequality, an impoverishing combination the region has not seen this century.”