Page 38 - Bank-Muamalat-AR2020

36 BANK MUAMALAT MALAYSIA BERHAD About Us Our Leadership Our Strategy
About Us
ANNUAL REPORT FY2020

INDUSTRY AND

MARKET OVERVIEW

MALAYSIA
Malaysia GDP by Demand and Sectors (%, change)
2020 Review 2019 2020 2021:P

Malaysia’s gross domestic product (“GDP”) Real GDP 4.3) (5.6) 7.0**
declined by 3.4% y-o-y in the fourth quarter By Demand:
of 2020, following the reinstatement of Domestic Demand 3.3) (5.1) 6.5
social distancing measures to contain the Private Consumption Expenditure 7.6) (4.3) 5.7
surge of virus infections. 2020’s full year Government Consumption Expenditure 2.0) 4.1) 4.0
GDP contraction stood at 5.6% y-o-y. Gross Fixed Capital Formation (2.1) (14.5) 9.6
The government introduced a nationwide External Demand:
movement control order (“MCO”) Exports of Goods and Services (1.3) (8.8) 7.3
commencing 18 March 2020 to curb the Imports of Goods and Services (2.5) (8.3) 9.4
spread of the virus. The most severely hit
economic sectors from these restrictions were Source:
manufacturing, tourism and construction. **Overview of World Economic Outlook Projections by IMF
Oxford Economics
The MCO led Malaysia to record the Outlook for 2021
worst performance in terms of GDP growth
among ASEAN-5 countries in the second The ongoing COVID-19 pandemic will remain as the biggest threat to the
quarter of 2020. However, as Malaysia eased economic recovery process followed by other issues such as rising protectionism,
restrictions by stages, the recovery was much geopolitical tension, political instability and volatility in commodity prices.
faster in the third quarter, exceeding the Generally, Malaysia’s GDP growth is projected to return to positive in 2021,
performances of Singapore, Indonesia and with the Malaysian government forecast of 6.5% to 7.5% y-o-y, while the IMF,
Philippines. the World Bank and Bloomberg median forecast GDP growths of 7.0%, 5.6%
to 6.7% and 5.5%, respectively. The expectation was generally based on the
Weaker consumer spending due to the prospect of the successful containment of the virus in the country and also by its
physical movement restrictions have had key trading partners, including China, Singapore and the US.
a spillover effect on the services industry,
particularly consumer-related sub-sectors The latest resurgence in cases in the months of January and February 2021 has
such as retail trade, restaurants, hotels, forced another round of lockdown restrictions, albeit viewed to be less stringent
travel, education and recreation services. than what was previously imposed and most economic activities are allowed to
International border closures also added continue operating within a strictly controlled environment.
to this impact. Nevertheless, the risk to
consumption was cushioned by growing As economic activities resume and sentiments improve, private consumption
online purchases as Malaysians adjusted and private investment are expected to rebound in 2021. The improving
to the ‘new normal’, facilitated by the domestic demand trend is expected to become more evident in 2021, arising from
availability of e-commerce platforms, home improving labour market, benign inflation, and numerous pro-consumption
delivery services and online financial services. initiatives announced by the government in its various economic stimulus
packages. These initiatives will encourage more spending moving forward
In a bid to provide assistance to the most as it raises the Rakyat’s disposable income.
affected consumer and business segments,
the Malaysian government implemented the Meanwhile, an increase in both domestic and global demands will raise local
necessary expansionary fiscal and monetary production, which would push for business expansions or encourage the
policies, with RM38 billion direct fiscal opening of new businesses. Soft loan/financing funds, grants and other
injection from the RM305 billion economic financial aid for entrepreneurs on top of Micro Franchise Development
stimulus packages announced in FY2020, programmes introduced by the government through its various stimulus
which include PRIHATIN, PRIHATIN SME+, packages, will be positive for new investment activities.
PENJANA and KITA PRIHATIN.
A gradual return in global activities as countries emerged from
Following the announcement of the COVID-19 shocks will result in more trade flows in 2021. The robust
expansionary 2021 budget, Fitch Ratings performance of China’s economy added support to this expectation as the
lowered its sovereign credit rating on country is Malaysia’s largest trading partner. As such, China’s economic
Malaysia by one notch to BBB+ due to the recovery would translate into continuous increase in demand for Malaysia’s
negative impact of the pandemic on its fiscal export products.
position and political risks.