World Bank lowers Malaysia’s 2020 GDP forecast to 4.9% in Macroeconomic Policy Outlook report

The World Bank in its Macroeconomic Policy Outlook has lowered Malaysia’s 2020 growth forecast to a real GDP contraction of 4.9 percent, down from 3.1 percent.

The report attributed the  change in the forecast to reflect the heightened uncertainty surrounding the pace of the global recovery.

In addition, elevated unemployment rate and other weaknesses in the labor market is expected to continue weighing on private consumption.

The report also stated that the most demand components such as net exports, private consumption and private investment are expected to contract  in 2020 with government expenditure expected to increase mainly due to stimulus spending.

Poverty at the USD 5.50/day (2011 PPP) upper middle income poverty line is projected to increase slightly from 0.8 percent to 0.9 percent in 2020 because of higher unemployment, reduced work hours and slower business for SMEs.

“The possibility of a more protracted than expected global recovery could continue to hamper investment decisions and further suppress external demand,” the report highlighted. Additionally, prolonged restrictions on international travel would weigh on the tourism sector.

The recent lingering political uncertainly including the possibility of a near term general election will also continue to weigh on private investment sentiment and could stall the progress of the recovery effort.

World Bank has also reported that the number of vulnerable households is likely to increase owing high unemployment and uncertainty over the outcome of the pandemic.

“The households will require continued financial support during the recovery. And enhanced social protection system is needed to provide more robust and sustainable protection beyond one-off crisis relief measures,” the report stated.

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