The World Bank today forecasts that Malaysia's economic growth for the year will decline to a contraction of 4.9% from 3.1% previously, based on the country's significant contraction in Gross Domestic Product (GDP) in the second quarter of this year due to the Covid-19 pandemic impact.
According to the World Bank's October Update for East Asia and the Pacific report released by the World Bank today, changes in Malaysia's GDP forecast indicate increasing uncertainty about the start and pace of the global recovery, which will burden investment decisions and external demand.
"In addition, rising unemployment and other weaknesses in the labor market will continue to burden the value of the consumption of goods and household services.
“Looking at these developments, most of the demand components (net exports, the value of consumption of household goods and services, and private investment) are expected to contract this year. Government spending is expected to increase due to spending stimulus, ”said the World Bank.
The World Bank added that the Malaysian economy was severely affected by the pandemic, resulting in a GDP contraction of 17.1% in the second quarter of this year.
The contraction was driven by a decrease in domestic demand following the implementation of the Movement Control Order (PKP) as well as weak external conditions.
"There is a risk that stricter curfews will be implemented throughout the country, as has happened in several states recently.
"Too long international travel restrictions will have a big impact on the tourism industry. The ongoing political turmoil, including the possibility of a general election in the near future, will continue to burden private investment sentiment and could stop the development of recovery efforts, "he explained.
However, the World Bank's GDP forecast is still at the contraction level predicted by Bank Negara Malaysia (BNM) which is around 3.5% to 5.5% this year.
According to BNM's statement on August 14, the country's GDP is expected to increase between 5.5% and 8% next year.
