KUALA LUMPUR (Aug 13): Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz said the 16.1% Gross Domestic Product (GDP) growth in the second quarter of 2021 (2Q21) indicates a continued recovery trajectory after the declines recorded in the past two quarters.

In a statement, he also highlighted the recovery in monthly GDP growth in April and May, at 40.1% and 19.8% respectively.

“This is attributed to the low base effect during the same months in 2020. Growth was also supported by the implementation of stimulus and assistance packages throughout the period, namely PERMAI, PEMERKASA and PEMERKASA Plus valued at a total of RM75 billion, and complemented by ongoing measures under Budget 2021,” said Tengku Zafrul.

While GDP growth in June declined by 4.4% due to the commencement of Movement Control Order (MCO) 3.0 in mid-May as well as Phase 1 of the National Recovery Plan (NRP) in early June, he said that the decline was smaller compared with April 2020.

Despite the headwinds posed by the resurgence of Covid-19 cases towards the end of 2Q21, he said various key economic indicators reflected encouraging signs of recovery.

These include the 1.4% increase in the Industrial Production Index in June, the 6.5% rise in the sales value of the manufacturing sector, as well as the 20.5% increase in the revenue of the services sector in 2Q21.

Besides that, he also highlighted the growth momentum of exports in June as well as favourable foreign direct investment during the second quarter, with a total RM8.2 billion in net investment recorded.

For comparison, the amount was 9.9% below the RM9.1 billion recorded in 1Q21.

“Investments were channelled mainly into the manufacturing, financial and insurance/takaful activities, as well as mining and quarrying sectors; particularly from Japan, Indonesia and the US,” said the Minister.

Moreover, he pointed out the healthy levels of liquidity coverage ratio in the banking system, Bank Negara Malaysia (BNM)’s high international reserves at US$111.1 billion, as well as the 2.1% increase in the FBM KLCI in 2Q21 and the RM24.5 billion of net inflows recorded in the ringgit bond market.

Looking ahead, Zafrul said the nation’s economy is expected to gradually recover as the National Covid-19 Immunisation Programme is accelerated and the NRP thresholds are met for each State, which will facilitate a broader reopening of economic and social activities.

“Globally, Malaysia is currently one of the fastest nations in administering vaccines, with more than 500,000 doses administered daily.

“To date, 70% of Malaysia’s adult population have received their first dose of vaccination. At the current rate, it is expected that 80% of the adult population in Klang Valley, and 50% of the nation’s adult population will be fully vaccinated by end-August,” he said.

Of the total RM530 billion in stimulus and assistance packages announced, he said more than RM300 billion is still available for the rest of 2021, which is expected to support economic recovery throughout the different phases of the NRP.

To date, a total of RM200 billion has been disbursed from the various packages, benefiting more than 20 million people and 2.4 million businesses since March 2020.

“Other factors that will drive Malaysia’s economic recovery include improving external demand from major trading partners, recovery in commodity prices as well as the implementation of infrastructure projects with high multiplier impact,” he said.

The Government is anticipating a challenging outlook for 3Q2021 due to the imposition of the Enhanced MCO for two weeks in most parts of the Klang Valley in July, as well as the prolonged Phase 1 of the NRP in several States.

Improvements are expected in 4Q21, supported by a gradual recovery from the reopening of more economic and social sectors as more people get vaccinated.

Meanwhile, he said efforts are underway to strengthen the “strategic levers of the nation” in moving towards the ‘Reform’ stage.

“This includes the new approach adopted by the Ministry of Finance in improving the country’s annual budgeting process to make it more transparent and inclusive.

“Amongst others, the Ministry will release a Pre-Budget Statement which sets out the Budget 2022 themes and focus areas, namely to drive economic recovery, rebuild the country's resilience and catalyse reforms,” he said.

Zafrul said the Government’s priority is to protect lives from the threat of Covid-19 and ensure the country’s economic growth prospects remain strong in the medium to long term.

He added that the Government will continue to respond strategically, proactively and decisively amid the challenging environment, while minimising permanent economic repercussions from the crisis.