Malaysia’s economy contracts 4.5 percent in Q3 amidst COVID-19

By , in Economy Nation on .

KUALA LUMPUR, Nov 12 — Malaysia’s economy contracted by 4.5 percent in the third quarter of 2021 (Q3 2021), as opposed to the 16.1 percent growth recorded in Q2 2021, said Bank Negara Malaysia (BNM). This was attributed to the reimposition of the nationwide containment measures during the period — in line with economists’ expectations.

In Q3 2020, Malaysia’s gross domestic product (GDP) growth was at -2.7 per cent.

“The performance was largely attributable to the strict containment measures — particularly in July — under Phase One of the National Recovery Plan (NRP)

“Economic activity subsequently picked up as more states transitioned into Phase Two with less restrictive containment measures,” said BNM Governor Datuk Nor Shamsiah Mohd Yunus during the BNM and the Statistics Department’s joint press conference on Malaysia’s Q3 2021 GDP performance.

She said the domestic economy is on track to expand by 3.0 per cent to 4.0 per cent this year, supported by the increase in economic activities as containment measures are progressively relaxed, as well as continued policy support.

The various relaxations of restrictions for fully vaccinated individuals, including interstate travel, would also spur tourism-related activities.

Additionally, the strengthening global demand will continue to support export growth.

Year-to-date, headline inflation had averaged at 2.3 per cent, and is projected to average between 2.0 per cent and 3.0 per cent for 2021.

Headline inflation moderated to 2.2 percent in Q3 2021, mainly due to the dissipation of the base effect from fuel prices and the implementation of the three-month electricity bill discounts, while core inflation remained at 0.7 per cent during the quarter.


Underlying inflation, as measured by core inflation, is expected to average below 1.0 percent for the year, while headline inflation is projected to remain moderate in 2022.

“As economic activity normalizes, core inflation is expected to edge upwards but remain benign, given the continued spare capacity in the economy and the slack in the labor market.

“The outlook, however, continues to be subject to global commodity price developments and some risk from prolonged supply-related disruptions,” said Nor Shamsiah.

On the supply side, all economic sectors registered a contraction with the construction sector contracted the most due to operating capacity limits.

She said on the expenditure side, domestic demand declined by 4.1 percent (Q2 2021: +12.4 percent), mainly weighed down by the contraction in private consumption and investment activities, while the continued increase in public sector consumption spending provided support to growth.

“Progressive lifting of containment measures and continued improvements in the labor market will be key to support the recovery, going forward,” she said.

On the ringgit, Nor Shamsiah said the local currency depreciated by 0.8 percent against the US dollar in Q3 2021, reflecting the broad strengthening of the US dollar on greater clarity from the United States (US) Federal Reserve that it would likely begin tapering its asset purchase program towards the end of the year.

Net financing to the private sector recorded an annual growth of 3.9 percent in Q3 2021, reflecting the outstanding loans and outstanding corporate bonds’ lower growth, as both contracted to 2.9 percent and 6.5 percent, respectively, during the quarter, from 3.6 percent and 6.9 percent in Q2 2021. 

 Outstanding household loan growth moderated to 3.2 percent from 5.3 percent in Q2 2021, amid slower growth across all purposes.

“Going forward into 2022, Malaysia’s growth trajectory is expected to improve, given the resumption of economic activities, further improvement in the labor market, continued policy support, and expansion in external demand.

“The progress and efficacy of vaccinations, compliance with Standard Operating Procedures (SOPs) as well as the ability to effectively contain outbreaks from any new COVID-19 variants of concern (VOCs) will be key to the expected recovery,” she added.

NMT as reported by Bernama

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