By Md Manzer Hussain

BENGALURU, (Reuters) – Malaysia’s battered economic system likely fell back into recession in the third quarter due to coronavirus-induced restraints that brought about economic activity to a standstill. A Reuters poll revealed this.

According to the survey’s median forecast, 20 economists predicted that the Southeast Asian economy would shrink 1.3% between July and September, after rebounding from the worst recession it had experienced in over two decades.

According to forecasts, the changes in Gross Domestic Product (GDP), which were due to be published on Nov. 12, varied from -6.0% up to +1.0%. It is clear that there are many uncertainties about the economic consequences of the COVID-19 pandemic.

Chua Hanteng, an economist from DBS Group (OTC) Research said that “the deceleration reflected strict movements restrictions to curb more contagious Delta vari virus infections.” With much of the economy subject to severe restrictions, private consumption and investment took a huge hit.

Renewed COVID-19 lockdowns in the Southeast Asian country dampened a nascent economic recovery, pushing Malaysia’s central bank https://www.reuters.com/business/finance/malaysia-cbank-slashes-2021-growth-outlook-covid-19-surge-lockdowns-2021-08-13 to slash its 2021 growth forecast to 3.0%-4.0% from 6.0%-7.5% previously.

The central bank cut its benchmark interest rate by 125 basis point last year when the pandemic gripped, and it is expected that rates will remain unchanged through the third quarter of next fiscal year. A separate Reuters poll indicated otherwise.

But the economy is expected to gain momentum, expanding 4.0% in the current three-month period as a ramped-up vaccination drive, a record government budget https://www.reuters.com/article/malaysia-economy-budget-idUSL1N2RP0N6 to spur post-pandemic recovery and gradual reopening have boosted hopes of a turnaround.

Malaysia’s government projects that the economy will grow by between 5.5% and 6.5% next year. It is driven by normalisation in economic activity, resume of projects, increased commodity prices, and strong external demands.

We expect strong recovery as economic restrictions ease further and normal life resumes. Capital Economics’ emerging Asia economist Alex Holmes said that this will be supported by loose fiscal policies. The recent budget for 2022 targets another increase in spending.

With vaccine coverage among the highest in the world and virus cases dropping sharply, as well as the government loosening restrictions, activities are rebounding strongly.”

However, economists warn that China’s future export prospects and ongoing pandemic concerns pose risks for growth. China is Malaysia’s biggest trading partner.