KUALA LUMPUR: The economy contracted at a smaller pace of 0.5% in the first quarter of this year as it extended its recovery from the 3.4% decline in the fourth quarter of last year.
The Statistics Department said on Tuesday the firmer economic performance was supported by the expansion in manufacturing sector and the rebound in the agriculture sector.
On the demand side, the uptick trend was attributed by the strong growth of exports of goods and services amid a smaller decline in household consumption and fixed asset investment.
The slight contraction was in line with economists’ expectations of the country to post its smallest quarterly GDP contraction since Covid-19 struck, before embarking on a positive growth trend in the coming quarters. This was based on the assumption a stricter movement control order (MCO) is not imposed.
A Bloomberg survey estimated a contraction of 0.9% year-on-year (y-o-y) from a negative growth of 3.4% in 4Q 2020. BIMB Securities Research expected GDP to have shrunk at a smaller pace of 0.6% year-on-year.
According to the Chief Statistician, Datuk Seri Dr Mohd Uzir Mahidin, “In terms of Malaysia's monthly GDP performance, January and February showed a decline of 3.5% and 3.6% respectively and rebounded strongly in March 2021 to 6%.
“For the quarter-on-quarter seasonally adjusted, GDP rebounded to 2.7% (4Q 2020: -1.5%) in this quarter, ” he said.
Mohd Uzir said the gradual recovery of Malaysia’s economy was influenced by the reopening of more economic activities during the Movement Control Order (MCO) 2.0 which is less stringent than the MCO imposed last year and it also benefitted from various stimulus packages to steer the economic recovery.
“The economy was also spurred by disposable income due to withdrawal of i-Sinar, i-Lestari and the increase in commodity prices such as oil palm and rubber, ” he said.
“The manufacturing sector grew stronger by 6.6% for the first quarter 2021 compared to 3% in the 4Q of 2020, ” he said.
The growth was underpinned by the electrical, electronics & optical products (10.6%) and petroleum, chemical, rubber & plastics products (7.3%).
The robust growth of electrical, electronics & optical products was due to the higher demand of microchips in electronic devices.
He said the continuous positive growth was contributed by the export-oriented industries which grew by 7.2% (4Q20: 3.4%) in line with the overall exports performance which recorded double-digit growth of 18.2% in 1Q21.
Similarly, the performance of the domestic-oriented industries increased by 5.3% (4Q20: 2.4%) for the quarter.
The agriculture sector grew marginally by 0.4%, a turnaround from a decrease of 1% in 4Q20.
He said the services sector, which is a major contributor to the GDP, contracted at a slower pace of 2.3% from a decline of 4.8% in the previous quarter.
The slower decrease was due to the rebound in the wholesale and retail trade sub-sector which recovered modestly at 1.2% (4Q20: -1.4%) in 1Q21.
Moreover, the finance and insurance; and information and communication sub-sectors continued their expansion to 11.3% and 6.3% respectively.
However, the services sector remained in negative growth partly due to the food & beverages and accommodation sub-sectors which contracted 29.8% (4Q20: -35.3%), thought it improved slightly from the previous quarter.
The mining and quarrying sector contracted at a slower pace of 5% compared to a 10.4% decline in 4Q20 largely supported by the rebound in natural gas at 0.3% (4Q20: -9.9%) and crude oil & condensate at negative 11.5 per cent (4Q20: -12.9%).
As for the construction sector, it contracted by 10.4%, an improvement from negative 13.9% in the preceding quarter. This was attributed to a slower decreased in residential buildings, non-residential buildings and civil engineering. However, specialised construction activities expanded 16.9% (4Q20: 9.4%).