KUALA LUMPUR: Malaysia’s economy suffered its worst contraction in more than 20 years during the second quarter, hit by a collapse in global trade and tough curbs to contain the coronavirus, the central bank said on Friday.

The economy shrank 17.1 per cent on-year in April-June — the first since the global financial crisis in 2009 and the deepest since the Asian financial turmoil 11 years before that — putting it on course for recession.

The reading was much worse than the 10.9 percent drop forecast in a survey by Bloomberg News, despite interest rates being cut to record lows. It shrank 16.5pc on-quarter.

Wan Suhaimi Saidi, an economist at Kenanga Invest­ment Bank, warned that the trade-dependent economy was “heading into a recession since there is no sign of a full recovery in demand and business activity”.

He told AFP he expects a full-year contraction of between four and six per cent, more than the central bank’s estimate of 3.5-5.5pc.

But Nor Shamsiah Mohamad Yunus, head of the central Bank Negara Malaysia, said the economy was poised for a recovery in the current quarter as virus-related restrictions are eased.

“We are likely to see a trough in the second quarter. The economy is poised for a recovery in the second half and rebound further in 2021,” he said at a virtual news conference. “I am cautiously optimistic the worst is behind us.”

Bank Negara said the second quarter decline “reflect­­ed the unprecedented impact of the stringent containment measures to control the Covid-19 pandemic globally and domestically” imposed from mid-March to early June.

The restrictions with border control measures globally hitting tourism arrivals, the central bank added.

Published in Dawn, August 15th, 2020