KUALA LUMPUR, Feb. 11 (Xinhua) -- Malaysia's gross domestic product (GDP) contracted 3.4 percent year-on-year in the fourth quarter of last year, rendering a 5.6-percent GDP drop for 2020, the biggest decline since 1998.
The Malaysian Central Bank said in a statement on Thursday that the negative growth in Q4 was largely attributable to the imposition of the Conditional Movement Control Order (CMCO) on a number of states since mid-October last year to contain the spread of the COVID-19 pandemic.
"The restrictions on mobility, especially on inter-district and inter-state travel, weighed on economic activity during the fourth quarter," said the central bank, despite the fact that continued improvement in external demand provided support to growth.
Except for manufacturing, all economic sectors continued to record negative growth. On the expenditure side, moderating private consumption and public investment activities weighed on domestic demand.
"On a quarter-on-quarter seasonally-adjusted basis, the economy registered a decline of 0.3 percent," said the bank.
While the near-term growth in 2021 will be affected by the re-introduction of stricter containment measures in January following spikes of new cases, the central bank said, the impact will be less severe than that experienced in 2020.
The growth trajectory is projected to improve from the second quarter onwards, it added.
The central bank said the improvement will be driven by the recovery in global demand, where the International Monetary Fund (IMF) has revised upwards its 2021 global growth forecast by 0.3 percentage points to 5.5 percent.
"Growth will also be supported by a turnaround in public and private sector expenditure amid continued support from policy measures, and higher production from existing and new facilities in the manufacturing and mining sectors," it said.
The central bank also opined that the vaccine rollout which will commence this month is also expected to lift sentiments.
Executive director of the Socio-Economic Research Centre (SERC) Lee Heng Guie told Xinhua that the scarring effect from the third wave of COVID-19 and CMCO has dented economic activities in the fourth quarter.
Lee, who anticipated the Malaysian economy to grow 4 percent this year, said the re-implementation of less restrictive MCO 2.0 in January and February are expected to weigh down consumer spending and business sentiment in the run-up to the Chinese New Year celebration.
"The strength of recovery depends on the containment of the virus and accelerated vaccination program," he added.
Meanwhile, Capital Economics said the Malaysian economy is projected to grow by 6.5 percent this year.
"The risks are firmly to the downside - if authorities fail to get the virus under control, we will have to cut our forecasts further," it said. Enditem
