Malaysia's Q2 2021 GDP could have been higher

In a research note today, PublicInvest Research said the 16.1 per cent GDP growth in Q2 2021 was boosted by a low-base effect as the GDP had tumbled sharply to -17.2 per cent in Q2 2020, when the whole world went into a pandemic-triggered shutdown.

"Output in Q2 2021 also received a boost following the roll-out of massive fiscal stimulus packages valued at RM530 billion (equivalent to 39 per cent of the GDP), as well as monetary measures, where the benchmark interest rate has been kept at a historical low since July 2020.

"However, on a sequential basis, output dropped after it ticked 2.0 per cent lower, a pullback against2.7 per cent growth in Q1 2021," it said.

Meanwhile, Moody's Analytics also believes that the sharp increase in Malaysia's Q2 2021 GDP reflected the benefit of the low-base comparison.

In its note, it said the economy was showing signs of recovery, thanks to resilient foreign exports and moderately good retail sales early in the second quarter, but the late surge in the Delta-variant COVID-19 cases disrupted the momentum.

"Exports have been a lifeline for Malaysia. It is the country's top priority to safeguard manufacturing and foreign trade to support the sluggish domestic economy in the second half of the year.

"But the road to recovery is a protracted one, and Malaysia lacks the ammunition to go into a third month of lockdown in August," it said.

The research firm noted that Bank Negara Malaysia had revised its 2021 GDP growth projection for the country downwards to between 3.0 per cent and 4.0 per cent, from between 6.0 per cent and 7.5 per cent previously.

"Our preliminary estimate for September-quarter yearly GDP growth reflects a downwardly revised view of economic conditions.

"We forecast full-year GDP of 4.7 per cent in 2021, but in light of the fluid COVID-19 situation in Malaysia, the annual GDP forecast will likely be subjected to further downward revision in September," it added.