KUALA LUMPUR (Nov 6): Malaysia's gross domestic product (GDP) is expected to grow between 6.5% and 7.5% in 2021, after a 4.5% contraction in 2020 due to the Covid-19 pandemic.
The strong rebound in GDP growth will be driven by the anticipated improvement in global growth and international trade.
On top of that, the impact of the stimulus packages implemented by the government is anticipated to have spillover effects and provide an additional boost to the economy in 2021, according to the Economic Report 2021.
However, the report pointed out that the favourable outlook hinges on two major factors — the successful containment and sustained recovery in external demand.
The report noted that the country's strong economic fundamentals and a well-diversified economy will help support the country's economic growth.
The Malaysian economy contracted by 8.3% in the first half of 2020 due to the Covid-19 pandemic, with a decline of 17.1% in the second quarter of this year.
Aided by the speedy implementation of various stimulus packages, the economy is expected to contract at a slower pace in the second half of this year, wrote the report.
The report highlighted that the month-to-month economic data signals green shoots of recovery, with a rebound in production and trade figures, a decline in unemployment and a recovery in private consumption compared to the monthly data of the second quarter of 2020.
The government's Covid-19 stimulus packages are expected to contribute over four percentage points to GDP growth, according to the Economic Report, noting that the government's all four stimulus packages, comprising fiscal and non-fiscal measures, totalled RM305 billion or 21% of the nation's GDP.
As the country recovers from the impact of Covid-19, the domestic economy will return to a more sustainable growth path.
"The focus will be on increasing foreign direct investment, enhancing productivity and reinstilling consumer confidence," said the Ministry of Finance (MoF).
As such, the government will prioritise essential areas such as improving the ease of doing business, enhancing the usage of technology and digitalisation across public and private sectors as well as ensuring a stable labour market.
Thus, the Budget 2021 will also introduce measures to increase productivity by enhancing the adoption of technology across the board.
"The government will continue to provide the necessary support for SMEs (small and medium enterprises) to prosper in the new environment, including the potential for going global," said MoF, adding that efforts will focus on the development of resilient SMEs.
For more stories on the Economic Report 2020/2021, click here.