• GDP declines by a record 17.1% in 2Q20
• Sharp contraction in domestic demand
• Double digit decline in all sectors except agriculture
• Current account registered a surplus of RM7.6bn or 2.5% of GDP
• Lower net inflow for FDI
• The worst should be over for now but a recession in 2020 is a foregone conclusion
• We revise our forecast downward to -4.9%.

Malaysia’s GDP growth contracted to a record -17.1% yoy in 2Q20 (1Q20: +0.7%), marking the steepest fall in quarterly GDP since records began, even worse than the -11.2% that Malaysia went through in 4Q 1998 at the height of the Asian Financial Crisis. QoQ growth also showed a sharp decline at -15.9% (1Q20: -7.0%). In seasonally adjusted terms, the economy shrank by 16.5% from the previous quarter, following a 2.0% sequential contraction in 1Q20. With two straight quarters of quarter-on-quarter declines, this confirms that Malaysia entered a technical recession.

Most key GDP components contracted as the Covid-19 pandemic and Movement Control Order (MCO) left deep negative effects on traditional growth sectors. On the expenditure side, significant contraction is seen in private consumption, investment, and net exports. These are, however, offset by marginal contribution from the positive government consumption during the period. On the supply side, while most economic sectors recorded lower growth, the agriculture component improved.

Source: BIMB Securities Research - 17 Aug 2020