The economy contracted 3.4% year-on-year in the October-December period, falling for a third straight quarter and faster than the 3.1% decline forecast in a Reuters poll.
Malaysia’s full-year economic performance dipped 5.6% in 2020, the worst annual performance since the 7.4% decline in 1998 during the Asian Financial Crisis, according to data from the department of statistics.
“Going into 2021, growth will rebound, supported by a pickup in global demand and normalisation in domestic economic activities,” Bank Negara Malaysia governor Nor Shamsiah Mohd Yunus said during a virtual news conference.
Some economists have revised Malaysia’s 2021 growth outlook below the range of 6.5%-7.5% projected by the government and central bank, as the Southeast Asian nation imposed a second lockdown to deal with a surge in coronavirus infections in recent weeks.
Malaysia has seen its cumulative total of coronavirus infections shoot past 250,000 cases as of Wednesday, including 923 deaths.
“There have been many developments, the resurgence of COVID and also progress with the vaccines… but importantly, we still expect growth in 2021 to recover,” Nor Shamsiah said.
Nor Shamsiah said monetary policy will “remain accommodative in an environment of modest prices”, and that the central bank has sufficient policy space to provide further support if needed.
Last month, the central bank left its overnight policy rate at a record low of 1.75%. It cut its key rate by 125 basis points last year to prop up the coronavirus-hit economy.
The trade-reliant economy had shown tentative signs of a rebound in the third quarter, driven by improving global demand. Full year exports fell 1.4%, though shipments began recovering in the last four months of 2020.
The central bank said it expects inflation to trend higher this year, after 10 straight months of decline largely due to low retail fuel prices.
The headline consumer prices index declined 1.2% in 2020.