Economic Crisis In Malaysia.

Malaysia Economy Suffers Worst Year Since 1998.

The 3.4 percent contraction in the fourth quarter.

Malaysia’s economic contraction quickened again in the fourth quarter, as a fresh virus wave late in 2020 helped drive the economy to its worst annual showing since the Asian financial crisis.

Gross domestic product shrank 3.4% in the fourth quarter from a year earlier, its third straight contraction and a deeper decline than the -3.1% figure analysts surveyed by us were expecting.

The economy contracted 5.6% for all of 2020, its worst performance since 1998 and below the government’s projection of -3.5% to -5.5%.

Central bank governor Nor Shamsiah Mohd Yunus said Thursday that monetary policy remains appropriate and accommodative after the bank cut its policy rate by 125 basis points last year to fight the recession.

Still, she added, the central bank has room to provide further support to the economy if needed. Malaysian stocks fluctuated after the data, with the benchmark index gaining 0.2% at the close at 12:30 p.m.

The market was only open for a half-day Thursday ahead of the Lunar New Year holiday. The ringgit was unchanged at 4.0445 against the dollar.

The worst may be over – at least for now – as Malaysia allowed the retail sector to resume operations Wednesday, following a month-long lockdown that’s estimated to have cost the economy 700 million ringgit ($ 173 million) a day.

The government said it would gradually reopen the economy even as the country remains under a state of emergency, seeking a balance that will protect lives while ensuring that economic activity continues.

The loosened restrictions came into effect after health officials estimated daily virus cases peaked at the end of January.

The nation added 2,764 new cases Tuesday – the smallest number since Jan. 11 – and Health Director-General Noor Hisham Abdullah said infections may show a downward trend by the time the lockdown is slated to end Feb. 18.

The tally rose to 3,288 cases Wednesday. The government last month unveiled a 15 billion ringgit package to help the economy weather the impact from the recent surge in Covid cases.

The plan, which includes cash support to the poor, tax breaks and wage subsidies, will be funded through a reallocation of existing funds and not via fresh spending.

So far, however, 2021 is off to a slow start with most of the country under lockdown.

The second wave of infections “will see the economy shrink much more sharply this quarter,” Alex Holmes, an Asia economist at Capital Economics, wrote in a note after the GDP release.

Even if the lockdown isn’t extended beyond next week, “high infections mean social distancing will remain a drag for months to come.”

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