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16.1% GDP growth in 2Q 2021! Okay, that is because…

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16.1% growth in 2Q 2021! Okay, that is because… Here’s that full report from Bank Negara Malaysia for our 2Q 2021 growth yeah. Click here to refer to the full article. So, the number is real and not some numbers plucked from the sky. By the way, quarter-on-quarter basis (means versus 1Q 2021, we actually registered a decline of 2.0% yeah.

So, the 16.1% growth in 2Q 2021 was because it was compared to 2Q 2020 yeah. Remember what happened in 2Q 2020? Covid-19 arrived and we had our very first lockdown in March 2020 which lasted until May 2020. So, 2Q 2020 was a gone case scenario because there were no economic activities during the lockdown period.

Why did we grow in 2Q 2021?

Economic performance was supported mainly by the improvement in domestic demand and continued robust exports performance. The strong growth also reflected the low base from the significant decline in activity during the second quarter of 2020.

Economic activity picked up at the start of the second quarter, but slowed down thereafter, following the re-imposition of stricter containment measures nationwide under Phase 1 of the Full Movement Control Order (FMCO).

All economic sectors registered an improvement, particularly the manufacturing sector. On the expenditure side, growth was driven by higher private sector spending and strong trade activity. On a quarter-on-quarter seasonally-adjusted basis, the economy registered a decline of 2.0% (1Q 2021: 2.7%), weighed by the tighter containment measures.

As expected, headline inflation increased to 4.1% during the quarter (1Q 2021: 0.5%), due mainly to the base effect from fuel prices, as well as the lapse in the effect from the tiered electricity tariff rebate. Core inflation remained stable at 0.7% during the quarter (1Q 2021: 0.7%).

We are on recovery path even if near-term growth is affected by recent resurgence in Covid-19 cases

The Malaysian economy remains on a recovery path in 2021. While the resurgence of COVID-19 cases and the re-imposition of nationwide containment measures are expected to weigh on growth, the impact will be cushioned by several factors.

These include continued allowances for essential economic sectors to operate, higher adaptability to remote work, as well as increased automation and digitalisation. Growth will be further supported by policy measures, which will provide cash flow support, particularly for affected households and businesses.

Going forward, the growth trajectory will depend on the ability to contain the epidemic and materialisation of health outcomes from the nationwide vaccination programme. This will allow economic sectors to gradually reopen and provide some lift to household and business sentiments.

BNM’s projection for 2021

Thus, in projecting the revised growth range for the year, the Bank took into account the latest global economic developments, the implementation of the first phase of the National Recovery Plan (NRP), and assumptions on the gradual transitions to the second, third and fourth phases for each state based on the pace of vaccination rollouts, and healthcare system capacities.

Against this backdrop, the Malaysian economy is projected to expand between 3.0% and 4.0% in 2021. The new growth projections are lower compared to the previously-announced growth range4, due in large part to the re-imposition of nationwide containment measures.

Nevertheless, the expected re-opening of the economy would support a gradual recovery in the fourth quarter this year, with higher global growth and sustained policy support providing a further lift to economic growth.

The recovery is expected to accelerate further going into 2022, supported by a gradual normalisation of economic activities as well as the positive spillovers from continued improvement in external demand.

Message from BNM Governor Datuk Nor Shamsiah

Emphasising the domestic immunisation programme, Governor explained “Malaysia’s growth recovery is expected to broadly resume in the later part of the second half of 2021 and improve going into 2022.

A key catalyst for economic reopening and a driver of positive sentiment will be the continued progress and effectiveness of the national vaccination programme, which would alleviate the strain on healthcare system capacity and allow for the relaxation of containment measures.

In addition, growth will be further supported by the ramp-up in commodity production, some materialisation of pent-up demand, and continued investment in large-scale infrastructure projects following lifting of restrictions.”

In the near term, headline inflation is projected to moderate as the base effect from fuel prices dissipates. For 2021 as a whole, headline inflation is expected to average between 2.0% and 3.0%.

Underlying inflation, as measured by core inflation, is expected to remain subdued, averaging between 0.5% and 1.5% for the year, amid continued spare capacity in the economy.

What has been said in brief?

GDP growth for 2021 is still going to be a positive number.

Economic measures taken has helped mitigate the fallout from the current Covid-19 situation.

Growth is expected to continue and accelerate in 2022.

Private consumption will be the key, which meant that as long as most people continue to have income, we will be fine.

Yes, I personally think we are not as bad as what some is saying. Thanks for reading.

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