Malaysia Central Bank Lowers GDP Growth Forecast to 3-4% This Year... "Impact of Delta Variant Spread"

Halved from the previous 6.0~7.5% range
Nationwide lockdown measures also threaten semiconductor supply chains

[Image source=EPA Yonhap News]

[Asia Economy Reporter Hyunwoo Lee] The Central Bank of Malaysia announced that it will significantly lower its GDP growth forecast for this year to 3-4%, about half of its previous projection. This is interpreted as a concern over worsening economic conditions due to the resumption of lockdown measures amid the spread of the COVID-19 Delta variant and inflation worries.

On the 13th, Bank Negara Malaysia, the central bank of Malaysia, announced that it had sharply revised down its 2021 GDP growth forecast to 3-4% from the previous estimate. The earlier forecast for this year's GDP growth by the Central Bank of Malaysia was 6.0-7.5%.

In a statement, the Central Bank of Malaysia said, "With the recent resurgence of lockdowns due to the spread of the COVID-19 Delta variant, there are concerns about economic contraction," adding, "Future growth rates may be adjusted depending on how quickly the spread of the variant is contained and nationwide vaccination is achieved."

Malaysia recently reinstated nationwide lockdowns as COVID-19 cases exceeded 20,000 amid the spread of the Delta variant. According to MarketWatch, more than 50 major global semiconductor companies, including AMD, Renesas, and NXP, which are concentrated in Malaysia, have simultaneously shut down their factories, exacerbating the shortage of automotive semiconductors.

However, the GDP for the second quarter of this year, released along with the revised forecast, showed a somewhat higher growth of 16.1% compared to the forecasted 15.0% year-on-year. This is attributed to a base effect, as the second quarter of last year saw a sharp contraction of -17.1% year-on-year due to the COVID-19 crisis. The Central Bank of Malaysia evaluated, "Until early in the second quarter, domestic demand and export performance were robust, and international oil prices were relatively stable, resulting in higher-than-expected growth."

Concerns are also emerging that inflationary pressures will intensify from the third quarter following the Delta variant. The Central Bank of Malaysia forecasted, "The inflation rate in the second quarter remained stable at around 0.7%, but due to recent oil price increases and other factors, the inflation rate is expected to rise to an average of 2-3%."

This content was produced with the assistance of AI translation services.