The 2021 first quarter GDP for Malaysia will be out next week. As usual, before we go into the details, let us play some games.
How fast do you think did the Malaysian economy expand in 1Q21 from a year ago?
- Faster than 10.0% (0%, 0 Votes)
- 7.6%-10.0% (0%, 0 Votes)
- 5.1%-7.5% (0%, 0 Votes)
- 2.6%-5.0% (36%, 5 Votes)
- 0.1%-2.5% (50%, 7 Votes)
- 0% or slower (14%, 2 Votes)
Total Voters: 14
Loading ...January, February and March industrial figures grew 1.2%, 1.5% and 9.3% year-on-year respectively. That is a 3.9% industrial expansion for the whole quarter. With industrial production representing approximately a third of the 2020 economy, this is a good sign.
This is especially so when services (60% of the 2020 economy) contracted slightly in the first quarter, falling 0.3% from a year ago.[1] This is likely caused by the second lockdown imposed by the government in January and February 2021. But I do not think that small contraction should not bring down the overall growth (and I do not think agricultural output will be too bad that it would bring the whole GDP growth down).
But we are in danger of getting distracted by growth number. We have been distracted earlier and the belief in V-shape recovery is a proof of that. Now, we are paying the price in the form of bad government response, and bad planning.
Instead of whether the first quarter (or the second quarter for that matter) would grow, there are two benchmarks we should focus on as far as the top line recovery is concerned:
- When will the GDP level (not growth) return to pre-pandemic level? This level should be the fourth quarter of 2019, and the answer will determine whether we have somewhat recovered.
- When will the GDP level (not growth) match the level it would have been if the 2020 recession did not happen? The answer to this question will tell us the long-term damage the economy has suffered.
Additionally, the real bad news is that, recovery has been uneven and its pace is flagging. March 2021 unemployment rate is stuck at 4.7%, after spiking to 5.3% back in May last year. The reason for the stubbornly high unemployment rate is that people are returning to the labor market, except that the economy is not creating jobs fast enough. Definitely, some jobs have been eliminated permanently.
Bottom line is, even if there is growth in the first quarter, I would not label it recovery just yet. In this situation, I rather not pay Genting Casino a visit. I prefer to err on the side of caution.
[1] — I made a noobish careless mistake here. I mistook quarter-on-quarter number for year-on-year. The year-on-year was much worse, and if I had realized it, I would have expected a contraction for the first quarter. Apologies.
