Malaysia’s GDP to contract 2.8% in 4Q 2020

Published on 09 Feb 2021.

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RAM estimates Malaysia’s GDP contracted 2.8% in 4Q 2020, amid the restrictions imposed under the conditional movement control order (CMCO). This will be the third consecutive quarter of contraction in 2020, leading to a 5.4% contraction for the full year (previous estimate: -5.3%).

Nonetheless, the contraction in 4Q 2020 is expected to be only slightly more pronounced than in the preceding quarter (3Q 2020: -2.7%; 2Q 2020: -17.1%). This is underscored by various supportive policies and the fact that most sectors continued to operate during the CMCO. 

We expect the manufacturing sector to be the main growth driver in 4Q 2020, with a 3.2% expansion (3Q 2020: 3.3%). The sector’s capacity – as indicated by the Industrial Production Index - remained fairly stable during the quarter. Nonetheless, we expect all other sectors to post negative growth. Retail sales - one of the hardest hit sectors - saw its growth rate deteriorated to -2.9% in 4Q 2020 (3Q 2020: -2.2%).

Figure 1: Industrial capacity stayed
fairly stable in 4Q 2020
             Figure 2: Retail trade growth slipped
in 4Q 2020

Sources: RAM and Department of Statistics Malaysia

The domestic economy is facing further headwinds in 1Q 2021, with the imposition of MCO 2.0. Our preliminary estimate has GDP growth sharply decelerating to -5.6% in 1Q 2021. As highlighted in our media release dated 29 January 2021, much of the drag on growth is envisaged to stem from the services sector due to tighter restrictions. With MCO 2.0 now extended until 18 February, we have revised our full-year GDP forecast from 5.8% to 5.5%. Every additional day of MCO extension is estimated to trim 0.04 percentage points (or about RM500 mil-RM600mil) off growth this year.

Summary of RAM’s key projections

Sources: RAM, DoSM, Ministry of Finance and BNM
*Assumes no further extension of MCO 2.0 (to end on 18 February 2021).
Note: 2020e and 2021f represent RAM’s projections.


Analytical contact
Woon Khai Jhek, CFA
(603) 3385 2512

Media contact
Padthma Subbiah
(603) 3385 2577


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