Are We Expecting a V-Shaped Recovery?

Malaysia’s economy contracted by 17.1% in Q2 2020 – worse than the AFC in 1998. The Chief Statistician of Malaysia says that in April, GDP contracted by 28.6%, in May it was -19.5% and June had -3.2%. Slower contraction in June was observed in all sectors, except for manufacturing and agriculture - both had growth of 4.5% and 11%, respectively.

Given the contraction in April-June, the full year GDP is at best -3.5% to -5.5% in 2020. The Malaysian economy is expected to stage a V-shaped recovery with growth projected to be 5.5% to 8% in 2021.

The Department of Statistics Malaysia has shown this in infographics as below:

Source: DoSM

The problem starts after the moratorium period in September. This is when companies/ firms need to meet debt obligations. Many are not ready for that! The optimistic view from BCG is recovery beyond Q3 of 2021 while McKinsey projects Q3 of 2022. And if one looks at IATA it is 2023 or beyond. Only businesses with deep financial resources can survive. Most economists believe in a U-shape rather than a V-shape. And some go on to suggest an L-shape. Whatever the alphabet, a vaccine available will certainly shape-up matters.

Reference:

Bank Negara: Worst is behind us, the Star, 15 August 2020

Malaysian Economy contracted by 17.1%, worst since 1998, RinggitPlus, 15 August 2020