The bank cut Malaysia’s 2020 GDP growth forecast from 4.5% to negative 0.1% in April due to the Covid-19 pandemic and disruptions to economic activities, and in the latest edition of its Malaysia Economic Monitor released today, the bank said it expects growth to resume in 2021 at 6.9 % as the outbreak eases.
However, it warned that the pandemic – coupled with a changing world of work – also raised the need for a more enhanced social protection system in Malaysia.
The World Bank called for a deepening of social assistance for lower-income households, an improvement in the delivery of social protection programmes and larger job recovery efforts.
“Important social protection measures are needed to help vulnerable Malaysians survive the current economic storm and thrive in a new post-pandemic reality,” said Firas Raad, World Bank group representative to Malaysia and country manager.
“Protecting livelihoods is important so that those who have lost their jobs and businesses are able to get back on their feet and contribute to Malaysia’s economic recovery,” he added in a statement.
Malaysia’s exports of goods and services declined for a third consecutive quarter by 7.1% in Q1 (first quarter) 2020, the largest decline since the global financial crisis in 2009.
In addition, private consumption dropped to 6.7 % in Q1 2020, down from 8.1% in Q4 2019 – which the World Bank said largely reflected the substantial impact of Covid-19 and the movement control order (MCO).
Aggregate investment contracted for the fifth consecutive quarter by 4.6% in Q1 2020, compared with a contraction of 0.7% in Q4 2019, with both private and public investment taking a hit.
The World Bank noted that the government responded to the economic impact of Covid-19 with two rounds of the Prihatin Rakyat economic stimulus package in February and March and the Penjana economic recovery plan earlier this month.
As the country’s recovery continues, the World Bank expects further rounds of cash transfers to remain important in mitigating financial strains among the most vulnerable groups in society and to support domestic consumption and human capital development.
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