KUALA LUMPUR, Nov. 6 (Xinhua) -- Malaysia's gross domestic product (GDP) is expected to contract by 4.5 percent in 2020, before rebounding between 6.5 percent to 7.5 percent in 2021, Malaysia's Ministry of Finance said in its Economic Outlook 2021 report released on Friday.
"Although domestic demand is expected to remain soft throughout 2020, there are signs of recovery in the second half of the year, particularly in private consumption," said the report.
On the external front, the report said the collapse in global demand and world trade led to a decline in exports during the year. On the supply side, all sectors are expected to contract, affected by the COVID-19 pandemic.
"Nevertheless, the pace of improvement gathered momentum in the third quarter, especially in the services and manufacturing sectors, with the resumption of economic activities," it said.
According to the report, Malaysia's domestic demand is expected to contract 3 percent in 2020. It is expected to expand by 6.9 percent in 2021, underpinned by various gradual stimulus packages and the gradual resumption of economic activities.
Private consumption is expected to record a marginal decrease of 0.7 percent in 2020. It is anticipated to increase by 7.1 percent in 2021, mainly supported by higher disposable income arising from buoyant domestic economic activities, stronger export earnings, accommodative financial stance, and favorable stock market conditions.
Private investment is projected to contract by 11.7 percent in 2020. It is expected to rebound by 6.7 percent in 2021, underpinned by government policies in place and coupled with spill-over effects from the fiscal injection.
Public investment is forecast to decline by 9.3 percent in 2020 but to expand by 16.9 percent in 2021, driven mainly by government initiatives.
Public consumption is anticipated to increase by 1.6 percent in 2020. It is expected to expand by 2 percent in 2021, with the government continuing to further improve public services delivery and optimizing spending.
In 2020, gross exports are projected to decline by 5.2 percent weighed down by global supply disruptions as a result of the unprecedented crisis. It is expected to rebound by 2.7 percent in 2021, benefiting from the recovery in global trade and supply chains.
"After a dismal economic performance in 2020 due to the COVID-19 pandemic, the Malaysian economy is expected to rebound firmly in 2021, in line with the expectation of a more synchronized global recovery," said the report.
Meanwhile, the Malaysian government expects its fiscal deficit to rise to 6 percent of GDP this year, the highest since the 2009 global financial crisis, from 3.2 percent of GDP, due to four necessary economic stimulus packages in response to the COVID-19 outbreak.
"Nonetheless, the government is committed to its fiscal responsibility agenda, in line with the goal of reducing the fiscal deficit to under 4 percent of GDP over the next three to four years," it said.