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Malaysia's GDP Falls At Slower Pace In Q1

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Malaysia's economy contracted at a slower pace in the first quarter underpinned by the improvement in domestic demand and exports.

Gross domestic product declined 0.5 percent annually in the first quarter, but slower than the 3.4 percent decrease seen in the fourth quarter, Bank Negara Malaysia reported Tuesday.

The economic activity gradually picked up as the restrictions related to the COVID-19 were relaxed in February and March.

"While the growth outlook continues to be shaped by developments surrounding the pandemic, the implementation of containment measures which are mainly aimed at curbing social activities and allow almost all economic sectors to operate, would minimise the impact on economic activity," BNM Governor Datuk Nor Shamsiah, said.

The central bank projected the economy to grow in the range of 6 to 7.5 percent in this year.

The rebound in GDP is impressive given that the economy was placed under a Movement Control Order from mid-January to early-March, Alex Holmes, an economist at Capital Economics, said.

But a resurgence in virus cases and the recent re-imposition of containment measures means GDP will probably stagnate this quarter, the economist added.

On a quarter-on-quarter basis, the economy registered a growth of 2.7 percent, in contrast to a 1.5 percent fall in the fourth quarter.

Headline inflation turned positive in the first quarter. Prices rose 0.5 percent, following a 1.5 percent drop in the fourth quarter. This was attributable to the positive albeit low fuel inflation following the base effect.

Headline inflation is expected to average higher between 2.5 percent and 4.0 percent in 2021, primarily due to the cost-push factor of higher global oil prices.

Inflation will temporarily spike in the second quarter of 2021 driven by the lower base from the low domestic retail fuel prices in the same period of 2020, BNM observed.

Although inflation is forecast to rise in the range of 6.5 percent to 7 percent in April and May, it will return to below 5 percent in June, the bank said.

The current account surplus fell to MYR 12.3 billion from MYR 19 billion in the fourth quarter of 2020, official data showed.

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