Analyst: M’sia set for economic rebound in Q3
Published on: Wednesday, September 16, 2020
By: Bernama
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Kuala Lumpur: The gradual improvement in economic activities in various sectors has given hope that the nation’s economy will turn the corner in the third quarter (Q3) of this year, an analyst said.

She said after a sharp downturn in the second quarter (Q2) this year, which saw the gross domestic product (GDP) shrank 17.1 per cent, economists were optimistic of seeing a strong rebound this quarter.

However, she said some sectors were still struggling to cope in the aftermath of the economic activity suspension during the Movement Control Order (MCO) phase.

“July’s industrial production index (IPI) has shown positive signs of improvement. On the other hand, manufacturing is showing signs of slower growth with exports remaining under pressure as global economy continues to be sluggish,” she told Bernama. 

According to data from the Department of Statistics, manufacturing contributed RM63.05 billion quarterly on average from 2010 until 2020, with the record high set at RM81.74 billion in the fourth quarter of 2019.

Manufacturing sector is one of the biggest contributors to GDP, accounting for more than 20 per cent contribution.

According to reports, although some countries have seen a gradual economic improvement in addressing the aftermath of Covid-19 with China posting strong rebound, other countries, including economic powerhouses, are still struggling to revive the economy to pre-Covid 19 level as debt and unemployment became a more serious issue. 

Malaysia also witnessed the unemployment rate rising to 5.3 per cent in May as economic activities were halted and borders were closed due to the implementation of the MCO, causing the services sector to take the worst hit. 

However, as the economy started to reopen and domestic travel has been allowed, services are slowly gaining momentum and unemployment slowly declined as months passed. 

RHB Bank said in a research note that the improvement in July’s IPI reading – which showed a return to positive year-on-year (y-o-y) growth – pointed to a good start for the GDP for Q3.

“While the headline number paints a positive picture, details indicate that the manufacturing sector is still struggling. Much of the improvement in July’s IPI was led by a strong rebound in mining production, while manufacturing production posted lower growth,” it said.

Nevertheless, it said if the momentum in production remained as it was or improved, the Q3 2020 GDP growth was expected to rebound strongly from the -17.1 per cent y-o-y seen in Q2.

“Overall, we maintain our GDP growth forecast at a contraction of four per cent y-o-y for 2020,” it added. 


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