MALAYSIA'S GDP DOWN 17%

NIKKEI - August 14, 2020  - Malaysia's economy contracted 17.1% on the year in the second quarter, the central bank announced on Friday, reflecting the dire impact of the coronavirus lockdown imposed through the three-month period.

This is Malaysia's worst performance on record and first quarterly decline since the third period of 2009, amid the global financial crisis. It marks a painful reversal compared with the 4.9% growth logged for the second quarter of 2019, and a steep drop-off after the country eked out 0.7% gross domestic product growth in the first three months of 2020.

The latest result was much worse than the median forecast of a 10% contraction in a Reuters poll of 11 economists, whose projections ranged from -5.6% to -13.6%. A Bloomberg survey showed a median outlook of -10.1%.

Tourism, manufacturing and investment were among the primary sectors hit by the lockdown, central bank Gov. Nor Shamsiah Yunus told a virtual news conference.

The economy suffered "a great impact in April from the movement orders imposed to contain COVID-19, and later saw some recovery in May and June," she said.

"Malaysia was affected badly if compared to the other countries in the region due to several factors, which include degree of containment, compliance rate toward the containment measures and the relative importance of the tourism sector to the economy," the governor added.

Singapore's economy contracted 13.2% on the year in the second quarter, while the Philippines posted a 16.5% drop and Indonesia reported a 5.3% fall.

After the second-quarter plunge, Malaysia's central bank is projecting a full-year contraction of 3.5% to 5.5% before a rebound to 5.5% to 8.0% growth next year.

The third-largest economy in Southeast Asia implemented a nationwide lockdown on March 18, closing borders and restricting movements of people. Although the rules were eased on May 4 to soften the economic impact, the government kept key restrictions in place until June 9, such as bans on mass gatherings and interstate travel.

In a televised address in May, Prime Minister Muhyiddin Yassin said Malaysia was losing around 2.4 billion ringgit ($558.4 million) every day since the lockdown or "movement control order" took effect. He said that the total loss up to May 1 was estimated at about 63 billion ringgit, and that the country risked losing $8.14 billion if the lockdown was extended by another month.

Weak external trade, low crude oil prices and the pandemic's adverse effects on tourism, aviation and manufacturing have all battered a Malaysian economy deeply reliant on international commerce. The lockdown also resulted in retrenchment and salary cuts for almost half of the working class, undermining purchasing power and domestic demand.

In June, the unemployment rate stood at 4.9%.

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