The worst GDP quarterly contraction in history of 17.1 % requires another similar RM45 billion economic stimulus package to battle the COVID-19 economic recession. The government should implement another cycle of post-COVID financial measures similar like the RM45 billion fund injection done earlier in April.
Seasonally adjusted real GDP fell 16.5% quarter-on-quarter (q-o-q). This compares with the first quarter decline of 2% q-o-q. With two consecutive q-o-q declines, this confirms that Malaysia entered a technical recession in 1H20 (first half of 2020).
Table 1: Malaysia’s 2020 GDP growth in year-on-year and quarter-on-quarter terms
| GDP growth | First quarter | Second Quarter |
| Year-on-year | 0.7% | -17.1% |
|
Seasonally-adjusted quarter-on-quarter |
-2.0% | -16.5% |
Additionally, Malaysia’s GDP performance is the worst among middle and upper income Asean countries that have reported their second quarter figures. Our neighbours namely Indonesia, the Philippines and Singapore all registered smaller declines than us. Only Vietnam was lucky enough to enjoy a weak growth (Table 2).
Table 2: Year-on-year GDP growth of major Asean economies
| Economies | First quarter GDP Growth | Second quarter GDP growth |
| Malaysia | 0.7% | -17.1% |
| Indonesia | 3.0% | -5.3% |
| Filipina | -0.2% | -16.5% |
| Singapura | -0.3% | -13.2% |
| Thailand | -1.8% | N/A |
| Vietnam | 3.8% | 0.4% |
Despite the government’s political spin, the economic data shows the government has not been doing enough to mitigate the recession. Bank Negara Malaysia’s data shows the government’s second quarter operating expenditure fell 2.1% from a year ago, compared to a 5.2% increase in the first quarter. If the government had done more faster, we could have experienced a shallower recession.
The unemployment rate of 4.9% in June hides the fact that there are many professionals such as pilots doing jobs other than flying airplanes. To put it simply, they are underemployed. Here, the government must realize that the quality of employment is just as important as the quantity of jobs.
This says nothing of pay cuts many hardworking Malaysians suffered over the past few months. As reported by the Department of Statistics Malaysia in April, 84% of private employees had suffered pay cuts. Bank Negara Malaysia also reported that during the second quarter, private wages fell by 5.6% from a year ago after rising 2.1% in the first quarter of 2020.
This points to the real risk of deflation that could hurt Malaysian living standards. With an economic recession, prices should fall. In June 2020, the consumer price index (CPI) deflated by 1.9% year-on-year after decreasing by 2.9% in May. Lower growth and lower prices are bad economic news.
There is greater urgency for another round of RM45 billion economic stimulus package to prevent deflation, including financial aid to small and medium enterprises and extending the moratorium on bank loans by another 6 months when it expires on 30 September. Failure to do so will cause greater hardship and even bankruptcy as many will struggle to serve their borrowings, either for cars, homes or business purposes.