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Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
JUNE 2020
MONITOR
MALAYSIA
ECONOMIC
Surviving the Storm
CONNECT WITH US wbg.org/Malaysia @WorldBankMalaysia @WB_AsiaPacific http://bit.ly/WB_blogsMY
MALAYSIA ECONOMIC MONITOR
© 2020 International Bank for Reconstruction and Development / The World Bank Sasana Kijang, 2 Jalan Dato Onn, Kuala Lumpur 50480, Malaysia Some rights reserved. This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved. Rights and Permissions This work is available under the Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO) http://creativecommons.org/licenses/by/3.0/igo. Under the Creative Commons Attribution license, you are free to copy, distribute, transmit, and adapt this work, including for commercial purposes, under the following conditions: Attribution: Please cite the work as follows: World Bank (2020) “Surviving the Storm” Malaysia Economic Monitor (June), World Bank, Washington, DC. Translations: If you create a translation of this work, please add the following disclaimer along with the attribution: This translation was not created by The World Bank and should not be considered an official World Bank translation. The World Bank shall not be liable for any content or error in this translation. Adaptations: If you create an adaptation of this work, please add the following disclaimer along with the attribution: This is an adaptation of an original work by The World Bank. Views and opinions expressed in the adaptation are the sole responsibility of the author or authors of the adaptation and are not endorsed by The World Bank. Third-party content: The World Bank does not necessarily own each component of the content contained within the work. The World Bank therefore does not warrant that the use of any third- party-owned individual component or part contained in the work will not infringe on the rights of those third parties. The risk of claims resulting from such infringement rests solely with you. If you wish to re-use a component of the work, it is your responsibility to determine whether permission is needed for that re-use and to obtain permission from the copyright owner. Examples of components can include, but are not limited to, tables, figures, or images. All queries on rights and licenses should be addressed to World Bank Publications, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; e-mail: pubrights@worldbank.org.
MALAYSIA ECONOMIC MONITOR JUNE 2020 Surviving the Storm
Acknowledgements This edition of the Malaysia Economic Monitor was prepared by Richard Record (Task Team Leader), Shakira Teh Sharifuddin, Yew Keat Chong, Mahama Samir Bandaogo, Achim Schmillen (Task Team Leader for Part 2), Amanina Abdur Rahman, Mark Dorfman and Alyssa Farha Jasmin. Samuel Fraiberger, Yan Liu, Jorge Guzman, Steven Pennings, Norman Loayza, Young Kim, Smita Kuriakose, Antoine Coste, Joshua Foong and Clarissa David provided additional contributions. Achim Fock, Firas Raad, Ndiame Diop and Philip O’Keefe provided overall guidance. The team is grateful to Hassan Zaman, Souleymane Coulibaly, Gabriel Demombynes, Ekaterine Vashakmadze, Ergys Islamaj, Vera Kehayova Kevin Cruz, Jeevakumar Govindasamy and Frederico Gil Sander for their constructive input on the document. This report benefited from productive discussions with staff from the Economic Planning Unit, Bank Negara Malaysia, the Ministry of Finance and many other government ministries and agencies, all of whom provided valuable information and useful feedback. In particular, the team would like to thank the International Cooperation Division of the Economic Planning Unit and the Economics Department of Bank Negara Malaysia for close ongoing collaboration with the World Bank and for the crucial support to the launch of this report. The team would also like to express its gratitude to analysts at several private financial firms and rating institutions, whose participation in a constructive dialogue also informed the analysis. Joshua Foong and Min Hui Lee led external communications and the production and design of the report. Irfan Kortschak provided editing assistance, while Aziaton Ahmad provided administrative support. Kane Chong designed the report and its cover. The report is based on information current as of June 19, 2020. Please contact Richard Record (rrecord@worldbank.org), Yew Keat Chong (ychong@worldbank.org) or Shakira Teh Sharifuddin (stehsharifuddin@worldbank.org) if you have any questions, comments or suggestions regarding the Malaysia Economic Monitor. 4 MALAYSIA ECONOMIC MONITOR | JUNE 2020
Abbreviations
ALMPs Active Labor Market Programs GVCs Global Value Chains
Apprenticeship Allowance for Children of Poor HRDF Human Resource Development Fund
APPERANTIS
Families (Elaun Perantis)
ILO International Labor Organization
B40 Bottom 40 percent (of the population)
IMF International Monetary Fund
BA Public Assistance (Bantuan Am)
IPI Industrial Production Index
Financial Assistance for Foster Care Children
BAP Department of Wakaf, Zakat and Haj (Jabatan
(Bantuan Anak Pelihara) JAWHAR
Wakaf, Zakat dan Haji)
Financial Assistance for Artificial Aid and
BAT/AS Assistive Devices (Bantuan Alat Tiruan/Alat Department of Social Welfare (Jabatan
JKM
Sokongan) Kebajikan Masyarakat)
Financial Assistance for Children (Bantuan Public Service Pension Fund (Kumpulan Wang
BKK KWAP
Kanak-Kanak) Persaraan)
BNM Bank Negara Malaysia LCR Liquidity Coverage Ratio
Financial Assistance for Older Persons (Bantuan Inland Revenue Board (Lembaga Hasil Dalam
BOT LHDN
Orang Tua) Negeri Malaysia)
BPN National Caring Aid (Bantuan Prihatin Nasional) Armed Forces Pension Board Fund (Lembaga
LTAT
Tabung Angkatan Tentera)
Financial Assistance for Carers of Bed-Ridden,
BPT Disabled and Chronically Ill (Bantuan OKU LTGM Long Term Growth Model
Terlantar/Pesakit Kronik Terlantar)
M40 Middle 40 percent (of the population)
BSH Cost of Living Aid (Bantuan Sara Hidup Rakyat)
MCO Movement Control Order
Financial Assistance for Persons with Disabilities
MEM Malaysia Economic Monitor
BTB Incapable of Work (Bantuan OKU Tidak
Berupaya Bekerja) MGII Malaysia Government Investment Issues
CAGR Compound Annual Growth Rate MGS Malaysian Government Securities
CMCO Conditional Movement Control Order MITB Malaysian Islamic Treasury Bills
COVID-19 Coronavirus Disease 2019 MOF Ministry of Finance Malaysia
CPI Consumer Price Index MTFF Medium-Term Fiscal Framework
DE Development Expenditure MySPC Malaysia Social Protection Council
DFI Development Finance Institution OE Operating Expenditure
DOSM Department of Statistics Malaysia OPR Overnight Policy Rate
DSR Debt Service Ratio PPP Public Private Partnership
E&E Electrical and Electronics PPTS Percentage Points
EAP East Asia and Pacific PRS Private Retirement Scheme
EIS Employment Insurance System RMCO Recovery Movement Control Order
EMDEs Emerging Market and Developing Economies RPGT Real Property Gains Tax
Allowance for Disabled Workers (Elaun Pekerja SIRCs State Islamic Religious Councils
EPC
Cacat)
SOCSO Social Security Organization
EPF Employees Provident Fund
SOEs State Owned Enterprises
FBM KLCI FTSE Bursa Malaysia Index
SMEs Small and Medium Sized Enterprises
FDI Foreign Direct Investment
SRR Statutory Reserve Requirement
FLFP Female Labor Force Participation
SST Sales and Services Tax
GDP Gross Domestic Product
T20 Top 20 percent (of the population)
GFCF Gross Fixed Capital Formation
TFP Total Factor Productivity
GLC Government Linked Corporation
WHO World Health Organization
GNI Gross National Income
Y/Y Year-on-Year
GST Goods and Services Tax
MALAYSIA ECONOMIC MONITOR | JUNE 2020 5
6 MALAYSIA ECONOMIC MONITOR | JUNE 2020
Table of Contents
Acknowledgements 4
Abbreviations 5
Summary 8
Recent economic developments 9
Economic outlook 12
Surviving the storm 14
PART ONE 18
Recent economic developments 20
The COVID-19 pandemic has triggered a collapse in global economic activity 20
Malaysia’s economy has been dramatically affected by COVID-19 21
Exports have continued to see negative growth 25
Inflation has trended downward due to a significant decline in fuel prices 30
The financial sector has remained resilient, despite significant outflows 31
The Prihatin stimulus package has helped blunt the impact of the crisis 35
Higher spending to cushion the pandemic’s impact coupled with declines in revenue have led to a
narrowing of fiscal space 37
Economic outlook 40
The global economy is projected to experience a major contraction this year 40
Malaysia’s economy is expected to contract sharply in 2020 41
The COVID-19 pandemic has exacerbated downside risks to growth 46
Policies in the near term should focus on protecting the most vulnerable 48
Medium-term measures should prepare the economy for recovery in a ‘new normal’ environment 50
In the long run, focus should be geared towards laying the foundations for the transition to a high-
income economy 53
The pandemic provides a window of opportunity for Malaysia to enhance its social protection system 53
PART TWO 56
Surviving the storm 58
The COVID-19 pandemic and changing world of work require an enhanced social protection system 58
The social assistance system does not yet provide a guaranteed minimum of protection to all those
in need 66
While BSH/BR1M coverage is very high, the program lacks an explicit objective 73
Core social assistance programs are progressive, but initiatives to promote productive employment
are still nascent 75
Uncoordinated delivery approaches reduce equity and efficiency 78
Coverage and adequacy of long-term savings arrangements need to be improved 80
Duplication and fragmentation exist in Malaysia’s labor market programs 84
Short- and medium-term policies should support COVID-19 recovery efforts and deepen social
assistance for the B40 85
In the long term, expenditure and revenue policies should support the development of an enhanced
social protection system 90
References 94
MALAYSIA ECONOMIC MONITOR | JUNE 2020 7
Summary
Summary
Malaysia’s economy has been severely
affected by the COVID-19 pandemic
In 2020, Malaysia’s economy is projected to structure, sound financial system, effective public
contract by 3.1 percent. In Q1 2020, growth slowed health response and proactive macroeconomic policy
to just 0.7 percent with efforts to flatten the curve of support suggest that Malaysia will be able to ride out
the pandemic through a series of movement control the storm better than many other countries.
orders and with deep uncertainty regarding growth
prospects severely constraining economic activity. A In the near term, Malaysia’s fiscal strategy should
pronounced output contraction of around 10 percent in be re-prioritized to create additional policy space.
Q2 2020 is envisioned, reflecting the significant impact This will require efforts to re-allocate expenditures
of the economic disruptions resulting from the MCO towards priority areas, identify new sources of non-
imposed during the quarter. This is expected to be tax revenue, as well as legislative amendments to
followed by a partial recovery in the second half of the temporarily increase available fiscal space.
year, as the outbreak eases and mobility restrictions are
gradually lifted. This forecast assumes that the spread The Prihatin stimulus package, and more recently
of pandemic is broadly contained at the global level the Penjana plan, have provided important support
and that the massive fiscal and monetary policy support to households and firms affected by the crisis.
measures implemented by governments around the However, efficiency could be improved, and the
world limit the depth of contraction in global economic quantum of financial assistance provided may need
activity. With all these factors, the near-term outlook for to be increased to adequately protect the welfare of
Malaysia’s economy is unusually uncertain at present. vulnerable households and to ensure the sustainability
of affected firms.
The COVID-19 pandemic has resulted in an
unprecedented crisis that requires large-scale and Over the medium term, the government should
unconventional policy responses by governments establish policies to prepare Malaysia’s economy
everywhere. With the crisis severely affecting private for a post-COVID-19 recovery in the context of
demand and causing supply shocks, the government is ‘new normal’ conditions. While to some extent,
tasked with the responsibility of facilitating economic the COVID-19 crisis has required the temporary
recovery in the near term. suspension of Malaysia’s medium and long-term
economic plans, it also creates an opportunity to
Malaysia’s economy remains resilient and rests accelerate necessary structural reforms. First, it will
on strong fundamentals. Its diversified economic be necessary to rebuild fiscal buffers and to ensure
8 MALAYSIA ECONOMIC MONITOR | JUNE 2020Summary
spending efficiency; second, to re-invigorate foreign
and domestic private investment; third, to upskill and Recent economic
developments
redeploy human capital; and fourth, to accelerate the
digitalization agenda.
The Malaysia Economic Monitor (MEM) consists of
two parts. Part 1 presents a review of recent economic The COVID-19 crisis has triggered a global
developments and a macroeconomic outlook. Part economic shock of historic magnitude, causing
2 focuses on a selected special topic that is key to a synchronized collapse in economic activity
Malaysia’s medium-term development prospects and across the world during H1 2020. In particular,
to the achievement of shared prosperity. economic conditions in East Asia and the Pacific (EAP)
deteriorated sharply as the impact of pandemic-related
lockdowns rippled through the region.
The crisis has demonstrated Malaysia’s economy has been dramatically
the importance of having an affected by COVID-19 and the subsequent
enhanced social protection movement restrictions implemented to flatten the
curve of the pandemic. The health and human toll of
system that provides the crisis on Malaysia has been enormous, with more
minimum protection to all than 8,000 confirmed cases and 121 deaths recorded to
date, and many more suffering from economic hardship
those in need and diminished prospects. The MCO announced in
mid-March led to a sudden decline in mobility in public
places and severely interrupted economic activity. It was
In this edition, the focus of the special topic is on later replaced by the Conditional Movement Control
Malaysia’s social protection system and how it can Order (CMCO) and then the Recovery Movement
be improved and leveraged to better address the Control Order (RMCO) that allowed progressively
needs of the Malaysian population within a rapidly greater mobility and resumption of economic activity.
changing economic context. This altering economic
environment flows from the shock of the global In this context, Malaysia’s economy expanded at
COVID-19 pandemic and the changing world of work the rate of 0.7 percent in Q1 2020. This represented
induced by growing digitalization and automation. a sharp deceleration from the rate of 3.6 percent
recorded in Q4 2019, which itself was significantly lower
With Malaysia set to achieve high-income country than in the preceding quarters of 2019.
status and with its new emphasis on ensuring
shared prosperity, it will need to ensure that its While private consumption remained the largest
social protection framework is fit-for-purpose. contributor to economic growth in the first quarter,
At present, the thin provision of social assistance its growth moderated to 6.7 percent in Q1 2020,
provides very limited support to enable the population down from 8.1 percent in Q4 2019. In particular,
to absorb shocks. To establish an adequate social the MCO weighed heavily on retail, travel, leisure and
insurance system, Malaysia needs both to improve recreational spending and on spending on durable
the adequacy of financial protection for those already goods. However, solid consumption expenditure in
contributing to existing systems and to expand January and February and the continued operation of
coverage to reach almost 40 percent of the labor force online platforms and delivery services throughout the
outside the current net. MCO period helped to support private consumption
during the quarter.
The need for these measures will become even
more acute as disruptive technologies and evolving Aggregate investment contracted for the fifth
demographics change the nature of work. The consecutive quarter, with declines in both private
special topic in this MEM presents an analysis of issues and public investment. Gross fixed capital formation
related to the framework for social protection, with a shrank by -4.6 percent in Q1 2020 (Q4 2019: -0.7
series of policy recommendations to enable Malaysia percent). Over the quarter, private investment was
to address the ongoing impacts of the COVID-19 crisis deeply affected by uncertainty related to the pandemic
and other challenges into the future. and the change in government. Over the same period,
public investment registered its tenth consecutive
quarter of negative growth.
MALAYSIA ECONOMIC MONITOR | JUNE 2020 9Summary
Exports of goods and services shrank for the growth (2.1 percent) helped to keep unemployment
third consecutive quarter in Q1 2020 due to weak stable at 3.3 percent in January and February. However,
external demand and heightened uncertainty. a decrease in tourism-related activities and the
Exports of goods and services declined by -7.1 percent enactment of the MCO resulted in employment growth
in Q1 2020 (Q4 2020: -3.4 percent), the largest decline decelerating to 1.6 percent over the quarter. In March,
since the 2009 Global Financial Crisis. Over the same unemployment was estimated to stand at 3.9 percent,
period, imports shrank by -2.5 percent (Q4 2019: and in April it rose to 5 percent, its highest rate since
-2.4 percent) due to a fall in capital goods imports, monthly data has been available.
especially machines and transport equipment. The
current account surplus narrowed to 2.9 percent of GDP Bank Negara Malaysia (BNM) lowered the
(Q4 2019: 3.4 percent), based on four-quarter rolling Overnight Policy Rate (OPR) from 3 to 2 percent
averages. in the period from January to May. In addition
to lowering the OPR, BNM boosted liquidity in the
financial system by lowering the Statutory Reserve
Requirement (SRR) from 3 to 2 percent and by allowing
Exports of goods and financial institutions to use their holding of Malaysian
services recorded its government bonds to comply with the SRR.
largest decline since The financial sector remained resilient in Q1 2020.
the 2009 Global The banking sector’s overall return on equity stood at
11.1 percent in Q1 2020 (Q4 2019: 13 percent), while
Financial Crisis return on assets was estimated at 1.3 percent (Q4 2019:
1.5 percent). Financial institutions’ capital and liquidity
ratios remained well above the minimum statutory
On the supply side, manufacturing and services requirements.
were the main drivers of growth in Q1 2020,
with agriculture, construction and mining all Heightened uncertainty caused a decline in
contracting. The decline in growth of services can performance in the domestic financial market.
be attributed to the direct impact of the pandemic Increased investors’ demand for safe assets has led to
on tourism and travel, which in turn weighed on retail, substantial non-resident outflows from domestic equity
food services and accommodation. Meanwhile, other and bond markets in February and March, with the
services that could be delivered through internet-based ringgit depreciating against the US dollar in line with
platforms and that were thus better able to weather the most regional currencies.
impact of movement restrictions, recorded increased
activity. The manufacturing sector was impacted first Responding to the impact of the MCO on
by disrupted international supply chains and then by vulnerable households and businesses, the
the MCO-related restrictions, which severely reduced government unveiled two rounds of the Prihatin
operational capacity. In the mining sector, ongoing Rakyat Economic Stimulus Package in Q1 2020.
maintenance led to contraction in the production of The package was designed with the aim of addressing
oil and gas. In agriculture, weather conditions were not three broad objectives: (1) to protect Malaysian
favorable to palm oil production, leading to a decline in households, including through one-off cash assistance
production. Of all the sectors, the construction sector programs; (2) to support businesses, including through
contracted the most (-7.9 percent), with the MCO a wage subsidy program for employees; and (3) to
leading to the closure of all constructions sites. ensure that the structure of the economy remains in
place, through measures to preserve jobs and support
Headline inflation stood at just 0.9 percent in domestic investment activities with strong multiplier
Q1 2020 (Q4 2019: 1 percent), with this low rate effects. More recently, the government has announced
mostly due to falling fuel prices. While the inflation the Penjana short-term economic recovery plan, which
rate was positive in January and February, at 1.6 percent outlined measures to help stimulate the economy.
and 1.3 percent respectively, the decline in fuel prices The Penjana plan focuses on three key thrusts, which
resulting from a significant decrease in global oil prices is to empower people, to empower businesses and to
caused inflation to turn negative in March (-0.2 percent) stimulate the economy.
and April (-2.9 percent).
Higher government spending to cushion the
Labor market conditions deteriorated over the pandemic’s impact coupled with declines in revenue
course of the first quarter. Strong employment have led to a narrowing of fiscal space. While the
10 MALAYSIA ECONOMIC MONITOR | JUNE 2020Summary
cost of the overall Prihatin Rakyat package amounts to a declined sharply, with crude oil prices expected to
total of RM260 billion, or 17 percent of GDP, the direct average at US$32 per barrel in 2020, half the US$62 per
fiscal injection is fairly modest, amounting to RM35 barrel assumed by the government in its budget.
billion (or 2.3 percent of GDP), with the bulk of the
expenditure on the one-off Bantuan Prihatin Nasional With projected increases to expenditure and
(BPN) cash assistance program. Meanwhile, the Penjana downward pressures on revenue, the fiscal deficit
plan increases the government expenditure by another is expected to widen in 2020, with a consequent
RM10 billion, of which the bulk is allocated for the erosion to fiscal policy space. Malaysia entered
extension of the wage subsidy program and upskilling the crisis with a relatively elevated level of federal
and re-skilling programs. The heavy reliance on non- government debt (2019: 52.5 percent of GDP) and a low
fiscal mechanisms to finance the bulk of both the level of revenue (2019:15.4 percent of GDP1). World Bank
Prihatin package and Penjana plan reflects the limited estimates suggest that the fiscal deficit could widen to
fiscal space available to government at the outset of the as high as 7 percent of GDP if measures to reduce non-
COVID-19 crisis. core spending or to secure additional non-tax revenue
are not adopted. The government’s options to finance
Falling global oil prices have placed additional any additional fiscal measures are constrained by
downward pressure on already declining federal statutory limits, which can only be amended through a
government revenues. Global commodity prices have parliamentary sitting.
1
Excluding the one-off Petronas special dividend of RM30 billion.
MALAYSIA ECONOMIC MONITOR | JUNE 2020 11Summary
Economic outlook year (2019: 0.7 percent), primarily reflecting the steep
fall in oil prices and the broad-based weaknesses in
demand.
World Bank projections suggest that the global
recession in 2020 will be the deepest in eight On the external front, the global pandemic
decades, despite the unprecedented policy has amplified existing downside risks. A further
response. Growth in the EAP region is expected to weakening of global growth would pose downside
slow sharply in 2020 to its lowest rate since 1967. risks to Malaysia’s external demand. Furthermore, with
ongoing uncertainty and increased risk aversion, this
Malaysia’s GDP is projected to decline by 3.1 could lead to heightened volatility in the domestic
percent this year (2019: 4.3 percent), mainly financial markets and to higher portfolio outflows.
reflecting a sharp slowdown in economic activity
in H1 2020. The near-term outlook for Malaysia’s
economy is unusually uncertain at present. The
baseline projection envisions a pronounced output
contraction of around 10 percent in Q2 2020, reflecting
the significant impact of economic disruptions from the
MCO imposed during the quarter, followed by a partial
recovery in the second half of the year as the outbreak
eases and mobility restrictions are gradually lifted. It
also assumes that the spread of pandemic is broadly
contained at the global level, and the sizable fiscal and
monetary policy support measures implemented by
major economies limit potential structural damage to
global economic activity.
While household expenditure and business
investment spending are expected to improve
gradually, they are likely to remain subdued
throughout the year due to the high levels of
uncertainty. Private consumption and aggregate
investment growth are projected to fall to 1.2 and
-4.9 percent respectively in 2020 (2019: 7.6 and
-2.1 percent). Despite large-scale support through
the Prihatin Rakyat and Penjana stimulus packages,
private sector activity is likely to recover modestly as With the outcome of the pandemic remaining
restrictions on social interactions are gradually scaled uncertain, there is a risk that it will lead to an
back, and will remain below its pre-crisis level over the increase in the number of vulnerable households.
foreseeable future. While necessary to curb the virus outbreak, the
implementation of the MCO has weighed heavily on
The recovery of the external sector is likely to be domestic demand, jeopardizing the sustainability of
relatively slow, consistent with the projected path many businesses and leading to higher unemployment.
of recovery in global trade. This year, Malaysia’s
exports and imports are projected to contract sharply, Particularly with existing statutory limits, any
by 12.9 and 9.2 percent respectively (2019: -1.1 and further narrowing of fiscal policy space could
-2.3 percent) in the context of the dramatic collapse in constrain the government’s ability to provide
global trade activity. A gradual recovery in Malaysia’s adequate economic support, especially in the near
external sector is expected to begin in H2 2020 as the term. The marked reduction in fiscal space presents
impact of the pandemic fades, and gain momentum a potential risk should the economic impact of the
next year as global trade activity begins to normalize. initial MCO be greater than anticipated, thus requiring
additional fiscal injections, particularly to provide
Consumer price inflation will likely be muted over support to vulnerable households and businesses.
the near term due to the marked decline in global These risks would be amplified by the occurrence of a
oil prices and overall demand since March. Inflation second wave of the pandemic that could require the re-
is expected to be close to 0 percent on average this imposition of the MCO.
12 MALAYSIA ECONOMIC MONITOR | JUNE 2020Summary
The collapse of the Pakatan Harapan government government’s immediate options are limited to either
in February 2020 and its replacement with a new reallocating some expenditure items or increasing its
coalition, known as Perikatan Nasional, has also reliance on government linked corporations (GLCs) such
contributed to uncertainty surrounding Malaysia’s as Petronas. However, these options may not provide
economic policy. In the near term, this includes the sufficient resources to adequately respond to the crisis
ability to table the necessary legislative amendments if a deeper stimulus is required. Thus, the government
and emergency bills in parliament, and subsequently could also consider pursuing legislative amendments
to gain sufficient support from the Dewan Rakyat (lower to existing laws through an emergency bill, as other
house) to pass them. countries have done.
On the upside, the containment of the spread of
COVID-19 and the various government support The crisis also presents
measures could be more effective than anticipated.
This would lead to higher pent-up consumer demand, an opportunity to
greater investor confidence, and consequently a more accelerate a number
robust recovery in domestic economic activity in H2
2020. A breakthrough in the development of effective of much needed
treatments and vaccines against the new disease is also structural reforms
possible, which would bring an earlier-than-expected
end to the global pandemic and contribute to a more
sustained resumption in global economic activity, with Over the medium term, policies should aim to
considerable positive spillovers to Malaysia’s economy. prepare the economy for post-COVID-19 recovery,
in the context of a “new normal” environment.
The COVID-19 pandemic is an unprecedented While the COVID-19 crisis has to some extent resulted
situation that requires the government to in the temporary suspension of measures mandated
implement large-scale and unconventional policy by Malaysia’s medium and long-term economic plans,
responses. While the outcome of the pandemic remains it also presents opportunities to accelerate a number
uncertain, and until more effective means to manage of structural reforms. Looking ahead, policies in the
it emerge, the economy can be expected to operate medium term should have four broad areas of focus.
under a set of new norms, characterized by social They should facilitate the intensive rebuilding of
distancing, temporary movement restrictions to contain fiscal buffers and ensure spending efficiency; the re-
local outbreaks, and limited international travel. With the invigoration of foreign and domestic private investment;
crisis severely affecting both private demand and supply, the upskilling and redeployment of human capital; and
it falls upon the government to do most of the heavy the promotion of the digitalization agenda. The reform
lifting to support the economy in the near term. agenda on strengthening institutions, governance, and
the capacity of the administration remains an important
The quantum of the financial assistance in the complement to these efforts and should be maintained.
Prihatin package and Penjana plan may need to be
increased. While the measures included in the Prihatin Finally, the COVID-19 crisis has emphasized the
package could help lessen the near-term disruptions importance of having an enhanced social protection
on vulnerable households and businesses, the package system that provides minimum protection to all
implicitly assumes that the crisis will pass within a those in need. Enhancing Malaysia’s existing social
few months. Given that it could take at least another protection system will entail the implementation of
1-2 years for the economy to return to pre-COVID-19 both short- and long-term policies. In the near term,
conditions, additional financial assistance may be the focus would necessarily be on support to the
needed to protect the welfare of vulnerable households COVID-19 recovery efforts through continued cash
and to ensure the sustainability of SMEs. transfers to the B40. There are also short- and medium-
term opportunities for deepening social assistance,
In the near term, fiscal strategy should be re- improving the delivery of social protection programs,
prioritized to create additional policy space and promoting a jobs recovery. Over the long term,
through legislative amendments. This would entail policies on both the revenue and the expenditure
placing fiscal consolidation efforts temporarily on hold side would be needed to support the combined
and increasing the government’s fiscal space to enable achievement of a guaranteed minimum of protection for
it to better manage larger-than-expected impacts all those in need and a broader and more progressive
from the pandemic. Without legislative changes, the tax framework.
MALAYSIA ECONOMIC MONITOR | JUNE 2020 13Summary
Surviving the assistance programs is high (encompassing 76 percent
of all individuals and 98 percent of those in the B20 as
storm per the distribution of income per capita), the level of
benefits is generally insufficient to achieve a reduction
in the poverty gap similar to that of the average upper
The COVID-19 pandemic and the associated middle-income and high-income countries. At about 1
economic slowdown underscore the need to better percent of GDP, spending on social assistance is also
protect individuals and households in Malaysia, low by international standards. There are also few
both during the recovery period and into the policies that link the beneficiaries of social assistance
medium- and long-term future. With the impact of programs to efforts to build their human capital or to
the COVID-19 pandemic on Malaysia, it faces a battle improve their productive inclusion in the labor market.
to defend the welfare and livelihoods of its people, In addition to a lack of specific support measures
especially those in the B40. The crisis is expected to and incentives for participating in those measures for
accelerate major changes around the world, ushering in beneficiaries with the capacity to work, there is also
what has been described as a “new normal.” a lack of coordination between social assistance,
education and labor market programs.
To survive the storm and thrive in the “new
normal”, Malaysia needs a mixture of expenditure With Malaysia’s economy operating in a “new
and revenue measures, including an enhanced normal” context, it is vital to improve the
social protection system that provides minimum performance of the social protection system and
protection for all those in need. Ideally, the guaranteed to ensure that it is integrated with wider economic
minimum of protection to all those in need will be set at policy. Throughout the recovery from the COVID-19
adequate benefit levels and regardless of specific work crisis, cash transfers to the B40 will remain vitally
arrangements. In addition, the social protection system important to provide short-term relief mitigating acute
would incentivize work, be responsive to changing financial strains, to support medium-term recovery
circumstances, and be fiscally sustainable. On the efforts, and to support consumption and human
expenditure side, it would cover publicly financed social capital development at a time of economic downturn.
assistance programs such as cash transfers, contributory Also, there is significant potential to achieve better
social insurance programs such as retirement savings, outcomes through both the flagship Bantuan Sara
and active labor market programs such as skills-building Hidup (BSH) program and the core social assistance
initiatives. An enhanced social protection system would programs implemented by the Department of Social
imply a strong role for the government and additional Welfare (Jabatan Kebajikan Masyarakat, JKM). Key to
fiscal expenditures. Thus, it would also require policy forming a more consistent systemic approach will be to
measures on the revenue side, such as the introduction improve and better harmonize the objectives, design
a broader and more progressive tax framework. and implementation of BSH and JKM programs. This
would include improving the coverage and adequacy
Structurally, Malaysia faces challenges related of some of the well-targeted JKM programs and to put
to the changing nature of work and its aging more emphasis on productive welfare for beneficiaries
population. Rapid technological transformation has with work capacity. It would also include clarifying the
been changing the way people work, leading to some objectives and improving the targeting performance of
degree of job displacement and a growing prevalence BSH. More generally, there is potential to improve the
of forms of jobs that do not involve “standard” equity and efficiency of social assistance programs by
employment relationships, such as own-account better coordinating targeting approaches, information
work and gig economy jobs. In addition, Malaysia’s systems, and front-end service delivery.
population is aging rapidly, with the proportion of
the population aged 65 and above expected to Participation in retirement savings institutions is
double from seven percent to 14 percent within only low, especially among the B40 and women, and the
24 years. This puts increasing pressure on the social majority of participants will only receive very low
protection system, particularly on components based benefits in retirement. With about 7.6 million active
on “standard” employment relationships. members, the EPF is the retirement savings institution
with the largest coverage in Malaysia, although coverage
In Malaysia, social assistance programs have is slightly lower than would be expected given the
only a modest impact on poverty reduction and country’s level of development. Coverage is especially
on promoting productive employment. While low among lower income households, with less than
the coverage of Malaysia’s non-contributory social half of the B40 being active EPF contributors. Average
14 MALAYSIA ECONOMIC MONITOR | JUNE 2020Summary
period of 20 years. In addition, consideration could be
given to converting all contributions to EPF wholly into
retirement savings, to mandating phased withdrawals of
EPF balances, and to exploring longevity insurance and
annuitization options. Over time, the EPF contribution
rate could be reduced as the benefit eligibility age
increases, provided that there is an observed increase
in coverage and adequacy. With the changing nature of
work, it is unlikely that EPF can ever reach full coverage
of the labor force even with all these measures. Thus, a
modest, broadly targeted social pension may also be
required.
There is a significant degree of duplication
and fragmentation in Malaysia’s labor market
programs. While the country has long emphasized
the importance of human capital development and
productive participation in the labor market, relevant
efforts have been constrained by the multiplicity
of implementing agencies and programs. This has
made it difficult to obtain accurate data on program
effectiveness; made programs costly to administer; and
created a lack of clarity among beneficiaries.
In the near future, the COVID-19 pandemic
increases the need for further wage subsidies as
well for effective labor market programs to address
rising unemployment and underemployment. Over
time, the focus of wage subsidies should shift from job
retention to job creation, largely consistent with what
was announced as part of the Penjana plan. Again,
broadly consistent with the Penjana plan, skills-building
initiatives will be vital to facilitate workers’ access to
jobs that will be in demand during the recovery, such
as those necessitating digital or socio-emotional skills.
contributions per worker are also relatively low because More in the medium and long term, measures to reduce
participation in “standard” employment is intermittent duplication and fragmentation of labor market programs
and the minimum withdrawal age is low relative to are needed. A deeper culture of program evaluation
global benchmarks. As a result, average balances are could produce significant benefits; flagship labor
inadequate, with more than half of workers at age 54 market programs that have been credibly evaluated
having balances of under RM150,000 and almost three could be strengthened and others discontinued.
quarters having balances under RM250,000. Average
balances for women are even lower. The development of an enhanced social protection
system implies a strong role for the government,
Several measures could increase the proportion of likely entailing additional fiscal expenditures
workers actively contributing to the EPF and ensure financed by higher, progressive taxes. Even a
that retirement savings could be sustained for a gradual expansion of the social protection system may
longer period of time. To increase coverage, oversight be challenging in the context of the downward trend
could be improved, including through a requirement in government revenues and the fiscal shock resulting
for the registration of all workers as a condition for from the COVID-19 pandemic. There is a critical need
the granting of business licenses and/or government to diversify the revenue base and to increase collection
contracts. To raise average balances, the minimum through more progressive taxation. Thus, an enhanced
withdrawal age for EPF could gradually be increased social protection system will require a mixture of public
to 65 through a well-considered transition process. For policy measures on both the expenditure and the
instance, the increase could be implemented over a revenue sides.
MALAYSIA ECONOMIC MONITOR | JUNE 2020 15Recent trends in Malaysia’s economy
Malaysia’s economic activity has slowed ...weighed down by contracting investment
markedly amid the COVID-19 pandemic... and exports
GDP, y/y, Percentage Contribution to GDP, y/y, Percentage
7 8
6 6
4
5
2
4
0
3
-2
2
-4
Q1-2017
Q2-2017
Q3-2017
Q4-2017
Q1-2018
Q2-2018
Q3-2018
Q4-2018
Q1-2019
Q2-2019
Q3-2019
Q4-2019
Q1-2020
1
0
Q1-2016
Q2-2016
Q3-2016
Q4-2016
Q1-2017
Q2-2017
Q3-2017
Q4-2017
Q1-2018
Q2-2018
Q3-2018
Q4-2018
Q1-2019
Q2-2019
Q3-2019
Q4-2019
Q1-2020
Net Exports Private Consumption Public Consumption
GFCF Change in Inventory Real GDP, y/y
Exports have seen negative growth... ...and the domestic financial markets have
seen significant outflows
Real Exports of Goods and Services, y/y, Percentage Non-resident Portfolio Flows, RM Billion
10 10
5
5 0
-5
0
-10
-15
-5
-20
06/2017
08/2017
10/2017
12/2017
02/2018
04/2018
06/2018
08/2018
10/2018
12/2018
02/2019
04/2019
06/2019
08/2019
10/2019
12/2019
02/2020
04/2020
-10
Q1-2016
Q2-2016
Q3-2016
Q4-2016
Q1-2017
Q2-2017
Q3-2017
Q4-2017
Q1-2018
Q2-2018
Q3-2018
Q4-2018
Q1-2019
Q2-2019
Q3-2019
Q4-2019
Q1-2020
Equity Corporate Bonds Government Bonds
and Sukuk and BNM Bills
Malaysia’s economy is forecast to contract ...reflecting a broad-based decline in private
by 3.1 percent in 2020... sector activity
GDP, y/y, Percentage Contribution to GDP, y/y, Percentage
8 8
6
6 6.9
5.7 4
5.1
4 4.7
4.4 4.3 2
2 0
-2
0
-4
-2 -6
-3.1 2015 2016 2017 2018 2019f 2020f 2021f
-4
Net Exports Private Consumption Public Consumption
2015 2016 2017 2018 2019e 2020f 2021f GFCF Change in Inventory Real GDP, y/y
16 MALAYSIA ECONOMIC MONITOR | JUNE 2020Surviving the storm
Malaysia will soon be aging rapidly, with the With the changing nature of work,
proportion of the population aged 65 and own-account work has been on the rise,
above doubling within only 24 years particularly among women
Population Aged 65 and Above, Population Aged 65 and Above, Share of Own-Account Workers among All Workers, Percentage
Percentage Number (’000)
16 7,000 25
14 6,000
20
12
5,000
10 15
4,000
8
3,000
10
6
2,000
4
5
2 1,000
0 0 0
1970
1980
1990
2000
2010
2020
2030
2040
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Population Age 65+ Percent of Population Age 65+ Men Women
The coverage of publicly financed social Social assistance benefits amount to a small
assistance is high across all income groups share of per capita income, leading to only a
especially among the B20 modest impact on poverty and inequality
Share of Households Receiving Social Assistance, Percentage Adequacy of Social Assistance Benefits, Percentage
100 40
35
80
30
25
60
20
40 15
10
20
5
0 0
Malaysia Low Lower Upper High Malaysia Low Lower Upper High
Income Middle Middle Income Income Middle Middle Income
Income Income Income Income
All B20 All B20
Coverage by retirement savings institutions Even among those covered by retirement
is far from universal, especially among lower savings institutions, a majority will receive
income households very low benefits
Average Contributions per Capita Individuals Contributing to EPF, Active EPF Members Aged 54, Estimated Monthly Pensions, RM
per Month, RM Percentage Number
600 45 25,000 4,500
40 4,000
500 20,000 3,500
35
3,000
400 30 15,000
2,500
25
2,000
300 10,000
20 1,500
200 15 5,000 1,000
10 500
100 0 0
5
Less than 50
50-100
100-150
150-200
200-250
250-500
500-1,000
1,000+
0 0
1 2 3 4 5 6 7 8 9 10
Income Deciles EPF Account Balances (’000)
Average Monthly EPF Contributions Per Capita Number of Active Members Age 54
Share of Working Age Individuals Contributing Indexed Annuity (Amount per Month)
MALAYSIA ECONOMIC MONITOR | JUNE 2020 17PART ONE
Recent Economic
Developments
and Outlook
18 MALAYSIA ECONOMIC MONITOR | JUNE 2020MALAYSIA ECONOMIC MONITOR | JUNE 2020 19
PART ONE - Recent Economic Developments and Outlook
Recent economic
developments
The COVID-19 pandemic has triggered a
collapse in global economic activity
The COVID-19 crisis has triggered a global (EMDEs) with available policy space have implemented
economic shock of historic magnitude, causing unprecedented fiscal and monetary support measures
a synchronized collapse in activity across the to prevent a more severe downturn, which has
world during H1 2020 (see Figure 1). The health contributed to recent stabilization in global financial
crisis represents the most severe economic shock the markets.
world has witnessed in decades, striking a devastating
blow to an already fragile global economy. The Economic conditions in EAP region deteriorated
necessary but economically costly mitigation measures sharply in H1 2020 as the impact of pandemic-
required to contain the public health crisis, together related lockdowns and external spillovers rippled
with widespread reductions in economic activity by through the region (see Figure 2). In China, the
many producers and consumers, have steeply curbed initial epicenter of the pandemic, output registered
consumption and investment, and have restricted its first contraction since 1976 in Q1 2020, as stringent
production and labor supply globally. The cross-border containment efforts led to a sharp economic slowdown
spillovers have also resulted in severe disruptions to in February. Output has begun to recover since March
international trade and supply chains, a sharp tightening when containment measures were relaxed, with
of global financial conditions and precipitous declines industrial production returning to growth in April. In
in commodity prices. Advanced economies and the rest of the region, domestic lockdowns and external
several emerging market and developing economies spillovers have led to the deepest fall in consumption,
FIGURE 1 FIGURE 2
The COVID-19 pandemic has resulted in a collapse Economic conditions in East Asia and Pacific have
of global economic activity also deteriorated sharply
GDP, y/y, Percentage GDP, y/y, Percentage
6 8
5 6
4
4
3
2
2
0
1
-2
0
-1 -4
-2 -6
-3 -8
Q1-2016
Q2-2016
Q3-2016
Q4-2016
Q1-2017
Q2-2017
Q3-2017
Q4-2017
Q1-2018
Q2-2018
Q3-2018
Q4-2018
Q1-2019
Q2-2019
Q3-2019
Q4-2019
Q1-2020
Q1-2016
Q2-2016
Q3-2016
Q4-2016
Q1-2017
Q2-2017
Q3-2017
Q4-2017
Q1-2018
Q2-2018
Q3-2018
Q4-2018
Q1-2019
Q2-2019
Q3-2019
Q4-2019
Q1-2020
Developing EAP Thailand China
World Advanced Emerging and
Economies Developing Economies Indonesia Vietnam Philippines
Source: World Bank Global Economic Prospects Source: World Bank Global Economic Prospects
20 MALAYSIA ECONOMIC MONITOR | JUNE 2020PART ONE - Recent Economic Developments and Outlook
production, investment and trade activity since the almost 50 percent since the start of the year, in large
East Asian financial crisis in 1998 for most countries. An part due to an unprecedented decline in transport and
abrupt tightening in global financial conditions since travel activity, which accounts for about two-thirds of
March has also triggered sharp spikes in interest rate global oil consumption. The prices of minerals and
spreads and sudden capital outflows from the region. base metals also fell sharply during H1 2020 due to
All major economies have responded decisively to weaker industrial demand, although the decline was
deteriorating growth prospects by implementing less pronounced than in the case of energy prices.
sizable targeted measures to support affected Overall, agricultural prices fell only modestly over the
households and businesses. period, with mounting concerns over food security due
to supply chain disruptions and temporary restrictive
Falling global demand has resulted in a marked trade policies imposed by a number of countries,
decline in commodity prices during H1 2020, with a despite production levels and stocks for most staple
particularly sharp drop in energy prices (see Figure foods nearing all-time highs.
3 and Figure 4). Brent crude oil prices have decreased
FIGURE 3 FIGURE 4
Falling global demand has resulted in a marked ... with a particularly sharp drop in energy prices
decline in commodity prices...
Changes in Nominal Price Indexes, May over January 2020, Percentage Major Commodity Price Indexes, US$ (2010=100)
100
Energy
Metals & Minerals
80
Food
Non-energy
60
Agriculture
Raw Materials
40
Fertilizers
Beverages
20
Precious Metals
01/2018
04/2018
07/2018
10/2018
01/2019
04/2019
07/2019
10/2019
01/2020
04/2020
-50 -40 -30 -20 -10 0 10
Energy Agriculture Metals & Minerals
Source: World Bank Source: World Bank
Malaysia’s economy has been dramatically
affected by COVID-19
Malaysia’s economy has been dramatically contact tracing, quarantine requirements for returning
affected by COVID-19 and the subsequent travelers and a travel ban for those coming from China.
movement restrictions implemented to flatten the With increases in the number of identified cases by mid-
curve of the pandemic. The health and human toll of March, the government enacted the Movement Control
the crisis on Malaysia has been enormous, with more Order (MCO) on March 18, which remained in force until
than 8000 confirmed cases and 120 deaths recorded to May. It was then replaced by the Conditional Movement
date, and many more suffering from economic hardship Control Order (CMCO) and the Recovery Movement
and diminished prospects. Soon after the first case of Control Order (RMCO) that allowed for progressively
the virus was reported in Malaysia in January, to stem greater mobility and resumption of economic activity.
its spread, the government enacted measures such as During the MCO, businesses could not operate unless
MALAYSIA ECONOMIC MONITOR | JUNE 2020 21PART ONE - Recent Economic Developments and Outlook
specifically authorized by the government to do so. decrease to mobility in highly frequented public places
While under the CMCO and RMCO, all economic such as retail and recreation outlets, transit stations,
sectors have been allowed to re-open except for workplaces, public parks, groceries and pharmacies
those on a negative list, subject to COVID-19 standard (see Figure 5 and Figure 6), leading to profound
operating procedures designed for each sector. demand and supply disruptions in the economy.
Compared to similar measures in other countries in the
The MCO led to a sudden and dramatic decline of region, Malaysia’s MCO was one of the most effective
mobility in public places and significant interruptions at restricting movement (see Figure 7) and helped to
to economic activities. The MCO resulted in a flatten the pandemic curve (see Figure 8).
FIGURE 5 FIGURE 6
The MCO lasted for over 6 weeks... ...leading to a dramatic decline in mobility
New Daily Confirmed Cases, 7-Day Moving Average Percent Change in Mobility from January 2020, 7-day Moving Average
175 40
155
20
135
0
115
95 -20
75 -40
55
-60
35
MCO CMCO -80
15
21-Feb
27-Feb
04-Mar
10-Mar
16-Mar
22-Mar
28-Mar
03-Apr
09-Apr
15-Apr
21-Apr
27-Apr
03-May
09-May
15-May
21-May
27-May
02-Jun
-5
31/12/2019
09/01/2020
18/01/2020
27/01/2020
05/02/2020
14/02/2020
23/02/2020
03/03/2020
12/03/2020
21/03/2020
30/03/2020
08/04/2020
17/04/2020
26/04/2020
05/05/2020
14/05/2020
23/05/2020
01/06/2020
10/06/2020
Residential Workplaces
Retail & Recreation Grocery & Pharmacy
Parks Transit stations
Source: World Bank staff calculations based on European Centre for Source: World Bank staff calculations based on Google data
Disease Prevention and Control data
FIGURE 7 FIGURE 8
Malaysia experienced one of the largest declines ...which helped to effectively flatten the curve of
in mobility in the region... the pandemic
Percent Change in Mobility from January 2020, Retail and Recreation Pandemic Curve, Log Scale
20 100,000
0
Total Number of Cases
-20 10,000
-40
-60 1,000
-80
-100 100
21-Feb
27-Feb
04-Mar
10-Mar
16-Mar
22-Mar
28-Mar
03-Apr
09-Apr
15-Apr
21-Apr
27-Apr
03-May
09-May
15-May
21-May
27-May
02-Jun
0
7
14
21
28
35
42
49
56
63
70
77
84
91
98
105
Number of Days Since 100th Death
Malaysia Thailand Indonesia Malaysia Thailand Indonesia
Singapore Korea, Rep. Philippines Singapore Vietnam Philippines
Source: World Bank staff based on Google data Source: World Bank staff calculations based European Centre for Disease
Prevention and Control data
22 MALAYSIA ECONOMIC MONITOR | JUNE 2020PART ONE - Recent Economic Developments and Outlook
In this context, the Malaysian economy expanded external and domestic economic conditions, increased
at a modest pace of 0.7 percent in Q1 2020 (see uncertainty, and interruption to ongoing investment
Figure 9). The modest growth rate recorded in Q1 projects due to the MCO weighed heavily on investor
2020 was significantly lower than that in Q4 2019, when sentiment, leading to the first period of negative
the economy grew by 3.6 percent. Although private growth in private investment in almost 10 years.
consumption moderated, it continued to be the largest Meanwhile, public investment grew at a negative rate
source of growth in Q1 2020 (see Figure 10). Over the for the tenth consecutive quarter in Q1 2020 (-11.3
same period, aggregate investment contracted for the percent; Q4 2019: -8 percent) due to a contraction
fifth consecutive quarter, continuing to drag on growth. in capital spending by the general government and
state-owned enterprises (SOEs).
Primarily due to the government’s imposition of
the MCO, private consumption growth moderated On the supply side, manufacturing and services
to 6.7 percent in Q1 2020, down from 8.1 percent were the main drivers of growth in Q1 2020.
in Q4 2019, with a particularly heavy impact on Manufacturing and services continue to expand,
retail, travel, leisure and recreational spending, as albeit at slower paces than in the preceding quarter.
well as spending on durable goods. However, solid The sharp moderation in the growth of the services
consumption spending in January and February, the sector can be attributed to the direct impact of the
Bantuan Sara Hidup (BSH) stimulus, and the continued outbreak on tourism and travel at home and abroad,
operation of online platforms and delivery services which in turn weighed heavily on retail, food services
during the MCO mitigated the impact on private and accommodation. However, services that could be
consumption during the quarter. Continued moderate delivered with minimal direct contact, particularly those
inflation (Q1 2020: 0.9 percent) also provided additional involving internet-based platforms, were better able
support to private consumption spending. Meanwhile, to weather the impact of movement restrictions, with
increased government spending on employees’ finance, insurance and services related to information
wages, goods and services led to an increase in public and communication recording increased activity. The
consumption (5 percent; Q4 2019: 1.3 percent). manufacturing sector was impacted by a number of
factors, including: (i) factory shutdowns in China, which
Aggregate investment contracted for the fifth disrupted supply chains and created a shortage of
consecutive quarter, with broad-based weakness intermediate inputs; and (ii) the MCO in Malaysia, which
in both private and public investment. Gross fixed resulted in shutdowns of non-essential facilities and
capital formation (GFCF) shrank by -4.6 percent to limits to operational capacity of 50 percent except
in Q1 2020 (Q4 2019: -0.7 percent). Deteriorating for facilities deemed to be essential. In the mining
FIGURE 9 FIGURE 10
Malaysia’s economy slowed down markedly in Q1 ...weighed down by negative investment and net
2020... export growth
GDP, y/y, Percentage Contribution to GDP, y/y, Percentage
7 8
6 6
4
5
2
4
0
3
-2
2
-4
Q1-2017
Q2-2017
Q3-2017
Q4-2017
Q1-2018
Q2-2018
Q3-2018
Q4-2018
Q1-2019
Q2-2019
Q3-2019
Q4-2019
Q1-2020
1
0
Q1-2016
Q2-2016
Q3-2016
Q4-2016
Q1-2017
Q2-2017
Q3-2017
Q4-2017
Q1-2018
Q2-2018
Q3-2018
Q4-2018
Q1-2019
Q2-2019
Q3-2019
Q4-2019
Q1-2020
Net Exports Private Consumption Public Consumption
GFCF Change in Inventory Real GDP, y/y
Source: DOSM Source: World Bank staff calculations based on DOSM data
MALAYSIA ECONOMIC MONITOR | JUNE 2020 23You can also read
