Skip to content
  • Group
    • About MARC
    • Leadership
    • Investor Relations
    • Notable Issuances
    • MARC Ratings
    • MARC Solutions
    • MARC Data
    • MARC Learning
    • Careers
  • Services
    • Credit Ratings & Related Assessments
    • Sustainability-Related Assessments
    • Economic & Fixed-Income Analysis
    • Sustainability-Related Advisory
    • Debt Advisory
    • Analytics Consulting Services
    • Subscriptions
    • Data Analytics
    • Credit Reporting
    • Learning Programmes
  • Insights
    • Rating Announcements
    • Research & Analysis
    • Views
    • MARC in the Media
    • Newsfeed
    • Latest@MARC
  • Events & CSR
  • Contact Us
    • Contact Us
    • Service Level Feedback Form
    • Publication Feedback Form
    • Whistleblowing
Menu
  • Group
    • About MARC
    • Leadership
    • Investor Relations
    • Notable Issuances
    • MARC Ratings
    • MARC Solutions
    • MARC Data
    • MARC Learning
    • Careers
  • Services
    • Credit Ratings & Related Assessments
    • Sustainability-Related Assessments
    • Economic & Fixed-Income Analysis
    • Sustainability-Related Advisory
    • Debt Advisory
    • Analytics Consulting Services
    • Subscriptions
    • Data Analytics
    • Credit Reporting
    • Learning Programmes
  • Insights
    • Rating Announcements
    • Research & Analysis
    • Views
    • MARC in the Media
    • Newsfeed
    • Latest@MARC
  • Events & CSR
  • Contact Us
    • Contact Us
    • Service Level Feedback Form
    • Publication Feedback Form
    • Whistleblowing
  • Sign In
  • Subscribe
  • Group

    Group

    The MARC Group of Companies comprises MARC Ratings, MARC Solutions, MARC Data and MARC Learning.

    • About MARC
    • Leadership
    • Investor Relations
    • Notable Issuances
    • About MARC
    • Leadership
    • Investor Relations
    • Notable Issuances
    • MARC Ratings
    • MARC Solutions
    • MARC Data
    • MARC Learning
    • MARC Ratings
    • MARC Solutions
    • MARC Data
    • MARC Learning

    MARC Ratings

    • Rating Guide
    • Rating Process
    • Rating Symbols & Definitions
    • Rating Methodologies
    • Regulatory
    • Lead Managers

    MARC Solutions

    MARC Data

    MARC Learning

    • Careers
    • Careers
  • Services

    Services

    MARC's subsidiaries each provide distinct product offerings and services.

    • Credit Ratings & Related Assessments
    • Sustainability-Related Assessments
    • Economic & Fixed-Income Analysis
    • Credit Ratings & Related Assessments
    • Sustainability-Related Assessments
    • Economic & Fixed-Income Analysis
    • Sustainability-Related Advisory
    • Debt Advisory
    • Analytics Consulting Services
    • Sustainability-Related Advisory
    • Debt Advisory
    • Analytics Consulting Services
    • Subscriptions
    • Data Analytics
    • Credit Reporting
    • Learning Programmes
    • Subscriptions
    • Data Analytics
    • Credit Reporting
    • Learning Programmes
  • Insights

    Insights

    Find the vital information you need and stay up to date with the latest news from MARC.

    • Rating Announcements
    • Research & Analysis
    • Views
    • Rating Announcements
    • Research & Analysis
    • Views
    • MARC in the Media
    • Latest@MARC
    • MARC in the Media
    • Latest@MARC
  • Events & CSR

    Events & CSR

    MARC organises a diverse range of events throughout the year to engage with all stakeholders.

    • MARCares
    • Events
    • MARCares
    • Events
  • Contact Us

    Contact Us

    Let's get the conversation started - Get in touch with us!

    • Contact Us
    • Service Level Feedback Form
    • Publication Feedback Form
    • Whistleblowing
    • Contact Us
    • Service Level Feedback Form
    • Publication Feedback Form
    • Whistleblowing
MARC Online
Subscribe
Menu
  • Group
  • Services
  • Insights
  • Events & CSR
  • Contact Us
Menu
  • Group
  • Services
  • Insights
  • Events & CSR
  • Contact Us
Credit Ratings & Related Assessments
Sustainability- Related Assessments
Economic & Fixed-Income Analysis
Subscriptions
Sustainability- Related Advisory
Debt Advisory
Analytics Consulting Services
Data Analytics
Credit Reporting
Learning Programme

Credit Ratings & Related Assessments

Sustainability- Related Assessments

Economic & Fixed-Income Analysis

Subscriptions

Sustainability- Related Advisory

Corporate & Debt Restructuring Advisory

Analytics Consulting Services

Data Analytics

Credit Reporting

Learning & Customised Programme

  • Insights
  • Latest@MARC
Corporate

Strong 3Q2020 rebound but challenges ahead

View Reports

Contacts

Chart 1
Posted Date: November 14, 2020

Malaysia's GDP in 3Q2020 signals the country's path towards economic recovery. While the resumption of economic activities has enabled some level of normalisation, the recent spike in COVID-19 infections and the imposition of lockdowns in a majority of states could dampen Malaysia's economic growth trajectory in the immediate term. Following the unveiling of Budget 2021 last week, we believe that Malaysia's recovery will be incremental as new waves of COVID-19 infections occur domestically and externally. As such, we believe that economic recovery in the coming quarters will depend on the following trends:

  1. The worst is over for 2020, but the scarring effects of the public health and economic crisis remain. Malaysia's 3Q2020 GDP growth print confirms that the economy has entered a technical recession, although at a much slower contractionary pace of 2.7% y-o-y (2Q2020: -17.1%). This is better-than-expected, due to improved industrial production, external demand and COVID-19-related stimulus measures.

    A similar trend was seen in other regional economies, namely Singapore (3Q2020: -7.0%; 2Q2020: -13.3%), the Philippines (3Q2020: -11.5%; 2Q2020: -16.9%) and Indonesia (3Q2020: -3.5%, 2Q2020: -5.3%).

    Malaysian businesses continue to show great resilience in weathering the downturn. According to a DOSM survey, only 1.9% of firms surveyed indicated that they face impending closure, while 42.5% said they are able to survive for more than six months.

    In 3Q2020, Malaysia's Industrial Production Index grew 0.8% y-o-y (2Q2020: -18.0%), driven by the 3.1% uptick in the manufacturing index. This was due to the recovery in external demand, evidenced by exports expanding by 4.6% y-o-y, up from -14.3% in the previous quarter. Unsurprisingly, manufacturing sales have also picked up to pre-COVID-19 levels, after collapsing in April and May. In 3Q2020, it rose 2.4% y-o-y from the previous quarter's -16.4%.

    Notwithstanding this, the scarring effects of the sharp downturn in 2Q2020 continue to manifest. Business confidence across all sectors remains very low (3Q2020: -21.0%; 2Q2020: -25.2%), and the unemployment rate (3Q2020: 4.7%, 2Q2020: 5.1%) is still higher than pre-MCO levels. We expect downside risks to predominate 4Q2020 growth prospects due to the resurgence in COVID-19 infections both domestically and externally, as well as a wider implementation of the Conditional MCO (CMCO) in Malaysia.

  2. We opine that the Malaysian economy is expected to moderate in the next two quarters. Undoubtedly, economic recovery will be primarily contingent on the complete cessation of the MCO and freer cross-border movements. We believe that the Malaysian economy will trend sideways in the coming months given that CMCOs are being deployed in a majority of states while international borders remain closed.

    There is hope for a recovery in domestic demand during the CMCO period, although prospects remain somewhat muted. Retail footfall appears to be in a downward trend since October 2020 despite considerable improvements over the preceding quarter, suggesting a shift towards online purchases.

    Loan applications jumped in June 2020, i.e. during the Recovery MCO period, but it continues to trend below pre-COVID-19 levels. We believe that this uptrend may not be sustained in the immediate term due to the challenging labour market conditions. After all, wage growth, which had already been stunted even before the pandemic, has been significantly impacted by the health and economic crisis. It comes as no surprise that according to the results of MIER's latest Consumer Sentiments Survey report, consumers continue to lack confidence over their economic well-being.

    We are cautiously optimistic with the recent news reports about the success of Pfizer's vaccine trial. Although this is a very encouraging development, mass rollouts of the vaccine, which will need regulatory approval, are not expected anytime soon. The fact that the vaccine must be stored at an extremely cold temperature (-70 degrees Celsius or below) will raise concerns about its viability for a tropical country such as Malaysia.

    The Malaysian economy continues to run below its long-term growth trajectory capacity as the current wave of infections and widening of CMCO have hampered prospects of recovery for the remainder of the year. If the current scenario of triple-digit daily infections continues for much longer, it could be quite some time before domestic demand returns as an economic growth driver. In any case, our full-year GDP forecast for 2020 currently stands at between -4.5% and -5.5%, before rebounding to between 6.3% and 6.7% in 2021.

  3. Rebound by major trading partners will aid Malaysia's recovery in 2021. Net exports played a critical role in improving Malaysia's 3Q2020 growth performance. Malaysia's exports to China, Singapore and the US have improved following the resumption of economic activities since 2Q2020. We believe that external demand will remain upbeat in the coming months as virus infections in China and Singapore appear to be under control.

    However, we take note that the rise in exports, and subsequently trade surplus, is largely due to the slowdown in imports of intermediate goods. Assuming that external demand remains constant, we believe that imports will rise considerably in order to cater for orders in the coming months. While this may put a drag on Malaysia's net exports, its total trade will move in tandem with the positive external demand. We believe that such an adjustment period will normalise in 1Q2021. In any case, there are concerns that the current growth support for the Malaysian economy stemming from external demand could only fizzle out in the face of stricter lockdowns in major advanced economies.

     Appendix

Chart 1: Real GDP growth (% y-o-y) by industry

Chart 2: Estimated period for companies/business
firms to recover

Chart 1 Chart 2
Source: Department of Statistics Malaysia (DOSM)

Source: DOSM’s Special Survey ‘Effects of COVID-19 on the Economy and Companies/Business Firms’ – Round 1
Chart 3: Labour market conditions

Chart 4: Retail footfall and retail sales

Chart 3 Chart 4
Sources: DOSM, MIER, CEIC

Sources: Google’s COVID-19 Community Mobility Report, CEIC, MARC ERD
Chart 5: Business confidence

Chart 6: Export performance

Chart 5 Chart 6
Sources: DOSM, MIER, CEIC Sources: DOSM, CEIC, MARC ERD


Contacts:

Firdaos Rosli, +603-2717 2936/ firdaos@marc.com.my;
Quah Boon Huat, +603-2717 2931/ boonhuat@marc.com.my;
Lee Si Xin, +603-2717 2942/ sixin@marc.com.my.

You May Also Like To Read

See All
Events

MARC to host economic discourse

6 December, 2022

Ratings

MARC Issues Sector Report On Banking Industry

1 December, 2022

Corporate

MARC honours high achievers of its 2021 Lead Managers' League Tables

23 September, 2022

See All

Let’s get started.

Subscribe to our mailing list today

Subscribe Now
Group
  • About MARC
  • Leadership
  • Investor Relations
  • Notable Issuances
  • Careers
Regulatory
  • Rating Reviews Summary
  • List of Defaults
  • List of Credit Ratings Published
  • List of Entities on Rating Watch
Services
  • Credit Ratings & Related Assessments
  • Sustainability-Related Assessments
  • Economic & Fixed-Income Analysis
  • Sustainability-Related Advisory
  • Corporate & Debt Restructuring Advisory
  • Subscriptions
  • Analytics Consulting Services
  • Data Analytics
  • Credit Reporting
  • Learning & Customised Programmes
Subsidaries
  • MARC Ratings
  • MARC Learning
  • MARC Data
  • MARC Solutions
Insights
  • Rating Announcements
  • Research & Analysis
  • Views
  • Latest@MARC
  • MARC in the Media
Events
  • Corporate Events
  • Corporate Social Responsibility (CSR)
  • Advertise with MARC
Contact Us
  • Contact Us
  • Service Level Feedback Form
  • Publication Feedback Form
  • Whistleblowing
  • Group
    • About MARC
    • Leadership
    • Investor Relations
    • Notable Issuances
    • MARC Ratings
    • MARC Solutions
    • MARC Data
    • MARC Learning
    • Careers
  • Services
    • Credit Ratings & Related Assessments
    • Sustainability-Related Assessments
    • Economic & Fixed-Income Analysis
    • Sustainability-Related Advisory
    • Debt Advisory
    • Analytics Consulting Services
    • Subscriptions
    • Data Analytics
    • Credit Reporting
    • Learning Programmes
  • Insights
    • Rating Announcements
    • Research & Analysis
    • Views
    • MARC in the Media
    • Newsfeed
    • Latest@MARC
  • Events & CSR
  • Contact Us
    • Contact Us
    • Service Level Feedback Form
    • Publication Feedback Form
    • Whistleblowing
Terms & Conditions
Privacy Notice
Copyright Notice
Whistleblowing
PDPA Notice
© 2023 Malaysian Rating Corporation Berhad. All rights reserved.
Facebook Twitter Linkedin

Join MARC Mailing List

I would like to subscribe this mailing list. Please tick whichever is applicable

I agree/ do not agree (please tick whichever is applicable) to receive future events, conferences or marketing materials from MARC. *

Privacy Notice *

Declaration *