KUALA LUMPUR: The Malaysian economy contracted 17.1 per cent in the second quarter of 2020 from a 0.7 per cent growth in the first quarter.
Bank Negara Malaysia said the decline reflected the unprecedented impact of the stringent containment measures to control the Covid-19 pandemic globally and domestically.
"In Malaysia, the nationwide Movement Control Order (MCO) included various measures that restricted production and consumption activities.
"This resulted in demand and supply shocks that emanated not only from significantly weak external demand conditions but also production constraints in many economic sectors," the central bank said today.
Additionally, Bank Negara said there was a marked decline in tourism activity due to international border closures and restricted interstate travel.
On the supply side, most economic sectors registered negative growth, while most expenditure components declined.
On a quarter-on-quarter seasonally-adjusted basis, the economy contracted by 16.5 per cent.
During the quarter, headline inflation was at -2.6 per cent, mainly due to substantially lower retail fuel prices compared to last year and the tiered electricity tariff rebate.
Core inflation moderated slightly to 1.2 per cent.
Bank Negara said the second quarter, the ringgit had appreciated by 0.5 per cent against the US dollar, following the resumption of non-resident portfolio inflows as investor sentiments and risk appetite improved.
This was due to the quick implementation of large-scale liquidity injections and policy responses by central banks and governments.
Additionally, investor sentiments were also supported by the gradual easing of movement restrictions in a number of countries.
This development is in line with regional currencies, which also appreciated against the US dollar during the quarter.
"In the more recent period beyond the second quarter, the low global interest rate environment and optimism on a recovery in global growth continue to drive the positive market momentum within the region.
"As a result, Malaysia continued to experience non-resident portfolio inflows and the ringgit appreciated by 2.2 per cent against the US dollar since end-June 2020 (as of August 13)."
However, Bank Negara said, the global environment remains highly uncertain in the near-term, which may lead to capital flows and exchange rate volatility going forward.