1. Malaysia’s GDP shrinks 5.

6% in 2020, worst performance since 1998

Malaysia's gross domestic product has shrunk 5.6 percent since 2020, surpassing
the government's 4.5 percent forecast and the steepest decline since the 1998 Asian
financial crisis, according to National Bank of Malaysia.

December inflation figures were released on January 22nd through Statistics

Malaysia. In December, the consumer price index fell 1.4 percent from a year earlier,
the 10th consecutive month of negative year-on-year growth since 2019. Full-year
inflation in 2020 will be 1.2%, the first annual deflation since 1969. However,
Malaysia's inflation is expected to return to positive growth due to low base effects
and an accelerated recovery in economic activity. The government's re-
implementation of the Action Control Order (MCO 2.0) programme in January this
year will create downside risks for inflation in the first quarter, while the outbreak and
vaccination programme will also create some uncertainty for inflation levels in the
second half.

Inflation fell last year, largely because of the impact of the epidemic on
commodity prices, local economic activity and consumer demand.The COVID-19
outbreak, which briefly shut down many economies, dealt a severe blow to the
Malaysian economy, particularly the demand for oil and the price of oil, which is one
of the main sources of exports in Malaysia, and the falling fuel price, which is a major
drag on inflation. In terms of local economic activity, restrictions such as the
government shutdown and social distance have led to a sharp decline in economic
activity. As a result, demand for transport, hotel accommodation and the consumer
price index have also fallen. After a nationwide closure control measure (MCO) was
implemented in mid-March last year to ease some of the controls in early May, but it
still hit local economic activity hard in the second quarter, real GDP contracted 17.1
percent year on year, and inflation fell to 2.9 percent in April and May. Subsequent
"recovery action control orders" (RMCOs) gradually opened the blockade, allowing
some economic activity, but inflation remained weak. On the consumer demand side,
household income and willingness to consume are constrained, and private
consumption expenditure and related prices are generally depressed. Malaysia's
unemployment rate rose 1.6 percent from 3.2 percent at the beginning of last year to
4.8 percent this year, and the growth of retail sales in the second quarter was more
than 18 percent lower than the same period last year. Government cuts to household
and transport taxes have also dampened inflation in the short term, but only
temporarily.

Total investment contracted 4.6 percent consecutively in the first quarter of 2020,
nearly 4 percentage points more than the contraction in the fourth quarter of 2019,
with both private and public investment generally weak. With the outbreak also
leading to weak external demand, Malaysia's exports of goods and services fell by
7.1% in the first quarter of 2020 for the third consecutive quarter, the biggest
contraction since the global financial crisis in 2009.

Moreover, personal consumption declined from 6.7% in the first quarter of 2020,
indicating the significant impact of MCO on consumption of recreation and leisure
activities as well as merchandise consumption. In response to the economic impact of
the pandemic, the Government launched two rounds of the Prihatin Rakyat Economic
Stimulus Package and the Penjana Short-Term Economic Recovery Plan in February
and March 2020. However, the increase in public spending and the decline in
government revenue have reduced the fiscal space, and we need to find new ways to
make breakthroughs.

Based on the findings and recommendations of the newly released World Bank
Malaysia Economic Monitoring Report. Prime Minister for Economic Affairs (Dato
Sri Mustapa Mohamed) said the report provides a convincing analysis of the current
economic challenges and will help in our efforts to accelerate the post-COVID-19
economic recovery process. Significant social protection measures are needed to help
vulnerable Malaysians weather the current economic storm and thrive in the new post-
pandemic reality. (Firas Raad)World Bank Group Country Representative and
Country Manager in Malaysia, says it is important to protect livelihoods so that those
who have lost their jobs and businesses can get back on their feet and contribute to
Malaysia's economic recovery.

According to the report's recommendations in the short term, the government

will focus on social assistance for low-income families, improving social security
programs, and promoting employment recovery. As the recovery plan proceeds, the
transfer of cash remains essential to ease Malaysia's severe financial stress; And the
need to support domestic consumption and manpower development during a severe
economic downturn. In the medium to long term, this would ensure that Malaysia's
social protection system provided a minimum level of protection to the people. This
goal is consistent with Malaysia's own shared prosperity agenda and with many
developed country and recovery goals.

One of the main manifestations of Malaysia's economic downturn in 2020 is the

instability of inflation. Since 2020, Malaysia's average annual inflation rate has been
positive for nearly 50 years. Overall inflation in 2020 is expected to be higher than the
average level in 2019, but remains moderate, the central bank said. This reflects the
lessening of the impact of the change in the consumption tax policy, the removal of
the fuel price cap at a time when the outlook for global oil prices is relatively weak,
and the place of policy measures to curb food prices.
(Sources :https://www.theedgemarkets.com/article/state-nation-inflation-make-
comeback-2021-only-mildly）
(Sources :https://www.worldbank.org/en/news/press-release/2020/06/24/malaysias-
economy-expected-to-contract-sharply-due-to-covid-19-in-2020-growth-to-rebound-
in-2021-world-bank）