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Economy Malaysia for 3Q 2021 is negative BUT…

Budget 2022

Economy Malaysia for 3Q 2021 is negative BUT…

We have movement control order (MCO) for the whole of 3Q. Thus, it is quite a certainty that the number will be in red; negative. Selangor and Kuala Lumpur only moved into Phase 3 on 1st October 2021. In other words, people only started to be able to have more freedom to travel in 4Q 2021. This is why 3Q 2021 was a negative one. However, based on all indications, 4Q 2021 will be a recovery quarter and this will continue in 2022 as well.

Please do read the full release from Bank Negara Malaysia as below. (Source is BNM website) as below:

— start —

Economic and Financial Developments in Malaysia in the Third Quarter of 2021

The Malaysian economy declined by 4.5% in the third quarter (2Q 2021: +16.1%)

The Malaysian economy contracted by 4.5% in the third quarter of 2021 (2Q 2021: +16.1%). This was largely attributable to the strict containment measures particularly in July, under Phase 1 of the National Recovery Plan (NRP)[1]. Economic activity subsequently picked up as more states transitioned into Phase 2 with less restrictive containment measures[2]. On the supply side, all economic sectors registered a contraction. The construction sector contracted the most due to operating capacity limits. On the expenditure side, domestic demand declined by 4.1% (2Q 2021: +12.4%), weighed down mainly by the contraction in private consumption and investment activities, while continued increase in public sector consumption spending provided support to growth. Governor Datuk Nor Shamsiah said “Progressive lifting of containment measures and continued improvements in the labour market will be key to support the recovery going forward”. On a quarter-on-quarter seasonally-adjusted basis, the economy registered a decline of 3.6% (2Q 2021: -1.9%).

Headline inflation moderated to 2.2% during the quarter (2Q 2021: 4.1%). This was due mainly to the dissipation of the base effect from fuel prices, and the implementation of the three-month electricity bill discounts. Core inflation remained at 0.7% during the quarter (2Q 2021: 0.7%). 

Exchange rate developments

The ringgit depreciated by 0.8% against the US dollar in the third quarter of 2021. This largely reflected the broad strengthening of the US dollar following greater clarity from the US Federal Reserve that it would likely begin tapering its asset purchase programme towards the end of the year. Since 1 October, the ringgit has appreciated by 0.9% (as at 9 November) against the US dollar, broadly in line with the trend in other regional currencies. The ringgit was further supported by an improved domestic outlook amid the economic reopening and higher commodity prices. Going forward, as uncertainties regarding global liquidity adjustments and developments surrounding the path of the pandemic remain, financial and foreign exchange markets are expected to be subject to periodic bouts of volatility.

Financing conditions

Net financing to the private sector recorded an annual growth of 3.9% (2Q 2021: 4.4%), reflecting lower growth in both outstanding loans (2.9%; 2Q 2021: 3.6%) and outstanding corporate bonds (6.5%; 2Q 2021: 6.9%). Outstanding household loan growth moderated to 3.2% (2Q 2021: 5.3%), amid slower growth across all purposes. Loan applications and disbursements, however, improved in September given the relaxation of movement restrictions. For businesses, outstanding business loans grew by 2.4% (2Q 2021: 1.3%), supported by higher working capital loan growth. This expansion was also mainly driven by the wholesale and retail trade, restaurants and hotels, and manufacturing sectors, in line with the resumption of business activity amid the reopening of the economy.

The Malaysian economy is expected to improve following the normalisation of economic activities

For 2021, the domestic economy is on track to expand by 3.0% – 4.0%. Growth will be supported by the increase in economic activities as containment measures are progressively relaxed, amid continued policy support. The various relaxations of restrictions for fully vaccinated individuals including for interstate travel would also spur tourism-related activities. In addition, the strength in global demand will continue to support export growth.

Going forward into 2022, Governor Datuk Nor Shamsiah explained, “Malaysia’s growth trajectory is expected to improve given resumption of economic activities, further improvement in the labour market, continued policy support and expansion in external demand. The progress and efficacy of vaccinations, compliance with Standard Operating Procedures (SOPs) as well as the ability to effectively contain outbreaks from any new COVID-19 variants of concern (VOCs) will be key to the expected recovery.”

Year-to-date, headline inflation has averaged 2.3%, and is projected to average between 2.0% and 3.0% for 2021. Underlying inflation, as measured by core inflation, is expected to average below 1.0% for the year. In 2022, headline inflation is projected to remain moderate. As economic activity normalises, core inflation is expected to edge upwards but remain benign given the continued spare capacity in the economy and slack in the labour market. The outlook, however, continues to be subject to global commodity price developments and some risk from prolonged supply-related disruptions.

See also:

[1] The NRP, announced on 15 June 2021, replaced the Full Movement Control Order (FMCO) that was earlier announced on 28 May 2021. There are four phases of the NRP, of which Phase 1 contains the most restrictive containment measures. 

[2] As at end-September 2021, only Perlis, Sarawak, Terengganu and Pahang were in Phase 3, while Labuan and Negeri Sembilan were in Phase 4 of the NRP. The Klang Valley first entered Phase 2 on 10 September 2021 and later into Phase 3 on 1 October 2021.

Bank Negara Malaysia
12 Nov 2021

© Bank Negara Malaysia, 2021. All rights reserved.

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Moving forward, economy Malaysia is positive because the world is also positive

In fact, for 2021, the expectation is for the domestic economy is on track for a 3-4% GDP growth. The main reason is because of the recovery in economic activities (plus all those pent-up demand yeah, just look at car sales, popular malls etc to understand why I say so). Meanwhile the lockdowns are progressively being lifted across all states.

In fact, we already have a quarantine free travel arrangement with Singapore if we are travelling by flight starting end of November 2021. Read here for the full news. Briefly, it is starting from 29th November 2021. Remember yeah, it is quite a certainty that the international borders would continue to relax all the current restrictions too. Here are the updates for a few countries including USA. (click to read)

Last but not least, the global economy continues to recover and this will support export growth which is essential to economy Malaysia. Remember yeah, we have trade surplus yeah (meaning we export more than what we import. So, value of Ringgit should be on the rise too due to higher demand…) and we are not like some country which has trade deficit, kept printing ever more money and yet the value of their currency somehow remains strong… Erm…

Happy understanding.

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Charles Tan The Founder The Writer Kopiandproperty
Charles Tan

Charles is Founder of He writes from his investment experience for the the past 20 years in investments including property, stock, unit trust and more as well as readings and conversations with many property gurus in the industry. is an independent property blog which is not affiliated to any media company, property developer or even real estate agencies.


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