Page 10 - Malaysia Marine & Offshore Industries Directory 2020/2021
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 to 1Q20’s GDP, but this 0.7% is still better than the -1% contraction that many economists and analysts had predicted. Some even anticipated a contraction as low as -4.0%.
Bank Negara Malaysia (BNM), which in April 2020 had estimated a GDP contraction of -2.0% to 0.5% for the year, said the second quarter (2Q20) GDP is expected to see a sharper drop compared to 1Q20, but it is predicted to recover in the second half of the year (2H20) with the lifting of the MCO and the resumption of economic activities.
BNM governor Datuk Nor Shamsiah Mohd Yunus pointed out that several key catalysts have been set in motion to support the country’s economic growth, such as the Prihatin Rakyat Economic Stimulus Package, BNM’s reduction of its Overnight Policy Rate, the continuation of public projects, as well as higher public-sector expenditure.
“The sizeable fiscal, monetary and financial measures and progress in transport-related public infrastructure projects will provide further support to growth in 2H20. In line with the projected improvement in global growth, the Malaysian economy is expected to register a positive recovery in 2021,” she said.
Meanwhile, Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz emphasized the importance of managing the pandemic quickly.
“I am not sure when we can come up with the vaccine for COVID-19, but with the help of the people, the government and everyone involved, we can help manage the situation and help the economy recover,” he said.
He also highlighted the impact that the stimulus packages are projected to have on the economy. “If there was no Prihatin Rakyat Economic Stimulus Package, the decline in the GDP would be more pronounced. It can generate up to 2.8% for the GDP. Therefore, it is important to help the economy recover in the short and medium term.”
The Prihatin Rakyat Package is the second stimulus package unveiled by the government. Announced on March 27, 2020, it is worth RM250 billion and includes the RM20 billion announced a month earlier in the first Economic Stimulus Package. Said to be the equivalent to 17% of the country’s GDP, Prihatin is expected to ease the burden of businesses and individuals facing income loss as a result of the MCO.
As the engines of the economy that employ two-thirds of the country’s workforce and contribute about 40% to the GDP, Small and Medium-sized Enterprises (SMEs) have been given special attention with an additional stimulus package worth RM10 billion.
More recently, just before the announcement of the RMCO on June 7, 2020, another aid package was unveiled by the government to assist the recovery phase. Worth RM35 billion, the National Economic Recovery Plan, or Penjana, is packed with 40 initiatives that address immediate issues such as unemployment and domestic spending.
With all this financial cushioning, can Malaysia look forward to avoiding a bad recession? This is not an easy question to answer. While analysts agree a recession is unavoidable, the severity of it is not quite clear. Despite BNM’s optimism about growth in the second half of the year, it has not been able to provide a definitive forecast range for the economy, as uncertainties posed by COVID-19 and domestic commodity challenges continue to persist.
BNM has already cut its OPR three times so far this year to ease the impact of the lockdown, but economists predict more cuts may be likely this year. At the time of writing, BNM still maintains a GDP of between -2.0% and 0.5% for 2020, but it will announce a revised forecast in the second half of the year.
With the situation still fluid, estimating the country’s growth rate for 2020 continuous to be a challenge because unlike a normal recession, this one has been triggered by a health crisis. Whatever the outcome, it is a safe bet that while everyone hopes for the best, they will be preparing for the worst.

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