Thursday 20 Jun 2024
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KUALA LUMPUR (Aug 14): Bank Negara Malaysia (BNM) has revised its official gross domestic product (GDP) growth forecast for 2020 to between -3.5% and -5.5%, mainly due to changes in world growth forecasts and the unprecedented length of the movement control order (MCO).

The central bank had previously forecasted growth of between -2% and 0.5% for the year.

BNM governor Datuk Nor Shamsiah Mohd Yunus said the pandemic has had a “larger than anticipated” adverse impact on economic activity in the first half of this year and that the recovery is expected to be more gradual than the previous forecast.

“During the second quarter, most countries around the world were in lockdown. Given the severity of the lockdown, the IMF (International Monetary Fund) revised its global growth forecast from -3% in April to about -4.9% in June 2020 as the depth of the downturn became more apparent worldwide.

“Secondly, our assumptions surrounding the length of our MCO changed significantly. When we released our economic and monetary review in April, we assumed four weeks of MCO. However, the MCO lasted for an additional three weeks until May 3,” she said during BNM’s 2Q20 GDP briefing earlier today.

She added that the following implementation of the Conditional MCO (CMCO) and the Recovery MCO (RMCO), which saw the extension of strictly enforced mobility restrictions, had resulted in a bigger-than-expected impact on economic output, as seen in the 2Q economic performance.

However, she pointed out that indicators such as the Manufacturing Industrial Production Index (IPI) and credit card spending has shown a notable improvement.

Nor Shamsiah said the 2Q20 economic contraction is likely a trough, and therefore the economy is poised for a gradual recovery in the second half of the year and is expected to rebound further in 2021.

BNM is forecasting a growth range of between 5.5% and 8% for 2021, underpinned by improvements in external conditions and a gradual normalisation in economic activities and labour market conditions.

Growth will be further supported by new investment projects, demand for technology and healthcare products, as well as expansion in commodity-related production capacity.

Meanwhile, headline inflation is likely to be negative this year, averaging within BNM’s earlier projection of -1.5% to 0.5%.

“For 2021, headline inflation is forecasted to average higher between 1% and 3%, in line with the longer term historical average. This mainly reflects the expected recovery in global oil prices and improvement in domestic demand conditions,” she said.

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