Malaysia’s GDP likely contracted in Q3 on renewed COVID-19 curbs – Businesshala poll

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BENGALURU (Businesshala) – Malaysia’s battered economy likely slipped back into contraction in the third quarter as coronavirus-induced restrictions brought economic activity to a near standstill, a Businesshala poll found.

FILE PHOTO: A view of the Kuala Lumpur city skyline in Malaysia August 15, 2017. Businesshala/ Lai Seng Sin

After returning from its worst recession in more than two decades in the second quarter, the Southeast Asian economy shrank 1.3% in July-September from a year earlier, according to the average forecast of 20 economists in the survey.

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Forecasts for change in gross domestic product (GDP) to be released on November 12, ranging from -6.0% to +1.0%, underscore the widespread uncertainty around the economic impact of the COVID-19 pandemic.

“The slowdown reflected tighter movement restrictions to prevent more contagious delta variant virus infections,” said Chua Han Teng, an economist at DBS Group Research. “With most of the economy under harsh restrictions, private consumption, investment and manufacturing activities took a major hit.”

The renewed COVID-19 lockdown in the Southeast Asian country undermined a nascent economic recovery, prompting Malaysia’s central bank to cut its 2021 growth forecast from 6.0%-7.5% to 3.0%-4.0%.

After cutting its benchmark rate by 125 basis points last year, as the pandemic gripped the central bank, rates were expected to remain unchanged until the third quarter of next year, a separate Businesshala poll showed.

But the economy is expected to pick up, expanding 4.0% over the current three-month period as a ramped-up vaccination campaign, a record government budget for a post-pandemic recovery and a gradual reopening made a turnaround. expectations have been raised.

The government expects Malaysia’s economy to grow 5.5%-6.5% next year, driven by a normalization of economic activity, restarting projects, higher commodity prices and strong external demand.

“We expect a strong recovery in the coming quarters as restrictions are further eased and normal economic life returns. It will also be supported by loose fiscal policy, with the recent 2022 budget targeting another ramp up in spending,” said Alex Holmes, Emerging Asia Economist at Capital Economics.

“Vaccine coverage is now one of the best in the world, with virus cases rapidly returning and the government easing restrictions, activity is rebounding strongly.”

But many economists warned of a bleak outlook for China’s export market and fears of a continuing pandemic pose downside risks to growth. China is Malaysia’s largest trading partner.

Reporting by Mohd Manzar Hussain; Voted by Devyani Satyan; Editing by Ross Finlay and Alex Richardson

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