Malaysia: Record contraction in Q2 GDP – UOB

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting reviewed the recently published GDP figures in the Malaysian economy.

Key Quotes

“Malaysia’s economy contracted by 17.1% y/y in 2Q20 (1Q20: +0.7% y/y) which is close to our - 18.5% estimate… This marks the steepest quarterly decline on record. Seasonally adjusted real GDP fell 16.5% q/q (1Q20: -2.0% q/q).”

“Looking forward, we expect economic activity to gradually improve in 2H20 going by the latest indicators that expanded in June including manufacturing production, exports, imports of capital and consumption goods. Consumer sentiment rebounded in 2Q20 possibly due to reopening of sectors and return to work for 12.7 million employees, as well as government assistance.”

“Bank Negara Malaysia (BNM) has revised 2020 GDP projections to -3.5% to -5.5% (vs. previous -2% to +0.5%) and expects growth of 5.5% to 8.0% in 2021… We expect GDP to trough in 2Q20 assuming that the economic recovery sustains and infection rates remain manageable in 2H20. We have penciled in one more 25bps cut in the OPR for the year at the Sep monetary policy meeting.”