The third quarter’s gross domestic product (GDP) decreased by 4.5 percent year on year (y-o-y), according to Bank Negara Malaysia, owing primarily to the severe movement limits in place since June to combat the rapidly spreading Covid-19 outbreak.
The drop follows a strong second quarter, when the economy grew 16.1% y-o-y, indicating a solid recovery path.
The country’s GDP fell by 3.6 percent in the second quarter of this year, owing to the economic slowdown induced by the lockdowns once again. Manufacturing fared best but was still unable to avoid a contraction, shrinking by 0.8% but construction tool the biggest hit, falling 20.6% compared with the third quarter of last year.
Despite the slowdown, Governor Nor Shamsiah Mohd Yunus said the country was still on track to fulfil the central bank’s earlier forecast of 3-4 percent growth for the year, predicting the economy would develop even faster in 2022, with a current growth rate of 5.5-6.5 percent.
“Malaysia’s growth trajectory is expected to improve given resumption of economic activities, further improvement in the labour market, continued policy support, and expansion in external demand.
“I know a lot of people are saying that the economy is facing stagnation, but let me emphasise here that this is not the case. Growth will accelerate to 5.5-6.5% next year, and we are not seeing indications of broad-based price increases or excessive wage pressures,” she said.
“Potential risks, however, include the emergence of more threatening Covid-19 variants, continued supply chain disruptions and any worsening in the local Covid-19 outlook,” she said.
In the third quarter, the labour market improved gradually but consistently, according to the BNM quarterly report. In September, the jobless rate was 4.5 percent, the lowest it had been all year.