Malaysia’s GDP to Soar by 9% in 2021?

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After all the “gloom and doom” of last eight weeks or so, we have some great news! The International Monetary Fund has projected Malaysia’s real GDP growth to be 9% in 2021.

This is the fastest among the Asean-5 countries, with a combined GDP growth of 7.8% for 2021. Indonesia, Thailand, the Philippines and Vietnam are expected to expand by 8.2%, 6.1%, 7.6% and 7%, respectively.

IMF anticipates Malaysia’s economy will contract by 1.7% in 2020. IMF’s 2021 projection for Malaysia is much higher than Fitch Ratings growth forecast of 5.8%.

Global growth is expected to rebound to 5.8% in 2021. This is reflecting normalisation of economic activity from very low levels. Global growth will be -3% in 2020, largely due to Covid-19, the lockdowns, trade wars and oil price collapse. However, the rebound in 2021 is predicated on the pandemic fading in the second half of 2020, and normalisation of economic activities. Again, policy actions taken by governments to prevent bankruptcies, job losses and system-wide financial strains must bear fruit.

There is extreme uncertainty on the strength of the recovery, hence caution may dampen aggregate demand. The Institute of Chartered Accountants in England and Wales (ICAEW) expects Malaysia’s economy to spring back to 4.5% in 2021. This is assuming macro policies and fiscal stimulus have the desired effect. China’s growth will be critical for Malaysia, as China is Malaysia’s largest trading partner. Anticipation is that China will grow at 1.2% in 2020 and rebound strongly to 9.2% in 2021. This is IMF’s latest forecast (April 2020).

About 98.7% of China’s manufacturing enterprises have reportedly resumed work. The purchasing managers’ index for the manufacturing sector rose to 52 in March from 35.7 in February.

The U.S., with the highest injection in the world, is projected to contract by 5.9% in 2020 but will bounce back to 4.5% growth in 2021 (IMF).

There are others who forecast Malaysia’s growth at 4-5% for 2021. Whether it is 9% or 4.5% for 2021, the prognosis gives us hope. And hopefully, this pandemic will be contained, and no new ones occur.

Reference:

1.     IMF: After 2020 contraction, Malaysia GDP to soar by 9pct in 2021, New Straits Times, 16 April 2020

2.     Malaysia’s 2020 GDP Growth to sink to 3.7% amid Covid-19, The Malaysian Reserve, 16 April 2020

3.     Fitch retains long-term rating, GDP to grow 5.8% in 2021, The Star, 10 April 2020