[Malaysia] Economic Outlook 2021: GDP to expand 6.5%-7.5%

In its Economic Report 2020, the Finance Ministry, however, said the favourable outlook hinges on two major factors - the successful containment of the Covid-19 pandemic and sustained recovery in external demand.

The country’s economy contracted by 8.3% in the first half of 2020, with a decline of 17.1% in the second quarter.

The economy is expected to contract at a slower pace in the second half of the year, aided by the speedy implementation of various stimulus packages to support the people and revitalise the economy.

“In 2020, the economy is expected to contract by 4.5%,” it said, adding that the impact of the packages is anticipated to have spill-over effects and provide an additional boost to the economy in 2021.

In 2021, the global economy is projected to recover with a growth of 5.2%. The advanced economies are forecast to rebound by 3.9%.

The government expects the services sector to rebound by 7% in 2021. With the normalisation of economic activities in 2021, all subsectors are projected to record positive growth.

The manufacturing sector, which contracted by 8.7% during the first half of 2020, is expected to rebound by 7% in 2021, driven by steady improvement in both the export and domestic-oriented industries.

The agriculture sector contracted by 3.9% in the first half of 2020 due to lower growth of oil palm and rubber subsectors following supply disruptions. The sector is anticipated to rebound by 1.4% in the second half of the year driven by the recovery in the oil palm subsector.

According to the report, the agriculture sector is expected to turnaround by 4.7% in 2021, supported mainly by higher production of palm oil and rubber.

Meanwhile, the mining sector, which tumbled 11% in the first half of 2020, is expected to rebound by 4.1% in 2021, supported by the recovery in global demand for crude oil and condensate as well as liquified natural gas.

Brent crude oil is expected to improve in 2021 to an average of US$42 per barrel and recover to pre-pandemic level in the medium term.

The construction sector contracted by 25.9% in the first half of 2020 and is expected to shrink by 11.8% in the second half of this year. Overall, for 2020, the sector is projected to contract by 18.7%.

At the same time, prolonged property overhangs continue to weigh down the performance of the sector. However, civil engineering and specialised construction activities subsectors are expected to improve gradually.

The construction sector is expected to rebound by 13.9% in 2021 on account of the acceleration and revival of major infrastructure projects, coupled with affordable housing projects. The civil engineering subsector will continue to be the main driver of the construction sector.

Among the major infrastructure projects include Mass Rapid Transit 2 (MRT2), Light Rail Transit 3 (LRT3), West Coast Expressway (WCE) and Bayan Lepas LRT as well as Pan Borneo and Coastal highways in Sarawak.

Meanwhile, private consumption is projected to record a marginal decrease of 0.7% in 2021 while public consumption is expected to expand by 2% in 2021 with the Government continuing to further improve public services delivery and optimising spending.

In 2021, gross national income (GNI) is projected to rebound by 7.8% to RM1.53 trillion, while gross national savings (GNS) by 2% to RM335bil.

Gross exports are expected to rebound by 2.7% in 2021, benefiting from the recovery in global trade and supply chains.

Gross imports are expected to turnaround by 5.3% in 2021, supported by an increase in all types of imports.

Meanwhile, the consumer price index (CPI) is expected to normalise at 2.5% in 2021 in line with better economic prospects and higher crude prices.

Total employed persons are projected at 15.1 million in 2020 and further expand to 15.3 million in 2021.

Of the 15.3 million employed, 9.7 million, or 63.3% will be recruited in the services sector, 17.4% in the manufacturing and 10.2% in the agriculture sectors.