KUALA LUMPUR: The Asian Development Bank (ADB) has downgraded Malaysia's gross domestic product (GDP) growth forecast to 3.8 per cent from 4.7 per cent for 2021 and 5.9 per cent from 6.1 per cent next year.
In its regular supplement of the Asian Development Outlook (ADO) 2021, ADB said the unexpected contraction in the third quarter (Q3) and an unsettled political environment prompted the revised forecasts.
"Malaysia saw volatile GDP performance in 2021 as it tightened and relaxed restrictions. Lockdowns crimped businesses and depressed economic activity to yield 4.5 per cent GDP contraction in Q3.
"The first three quarters of 2021 nevertheless recorded GDP growth by 3.0 per cent, reversing 6.4 per cent contraction in the same period a year earlier."
ADB noted that as of November 12 this year, 75.7 per cent of the population had been fully vaccinated, allowing more economic reopening.
"In October, the government eased restrictions in the Klang Valley, a region that includes Kuala Lumpur, Putrajaya, and Selangor and produces about 40 per cent of Malaysian GDP," the bank said.
Meanwhile, ADB said inflation forecast for Malaysia were sustained at 2.5 per cent in 2021, slowing a bit to 2.3 per cent in 2022.
Regionally, ADB said Southeast Asia's 2021 outlook had been revised down by 0.1 percentage points to 3.0 per cent as economies in the subregion imposed targeted restrictions in the face of Covid-19's Delta variant.
It said next year's growth forecast was increased to 5.1 per cent as the regional economies were expected to continue easing overall restrictions and reviving economic activities.
The bank said regional inflation was expected to remain manageable at 2.1 per cent in 2021 and 2.7 per cent in 2022, allowing for a more accommodative monetary policy and supporting pandemic recovery efforts.
ADO, ADB's annual flagship economic publication, is published every April, with an update published in September and brief supplements published normally in July and December.