KUALA LUMPUR (May 25): The Department of Statistics Malaysia (DOSM) said the country’s Leading Index (LI) improved significantly in March 2021, increasing 17.3% year-on-year (y-o-y) to 113.3 points from 96.6 points in March 2020.
The rise was the highest-ever annual growth recorded, given the sharp economic contraction in March 2020 amid the enforcement of the first movement control order (MCO) in efforts to contain the Covid-19 outbreak.
Chief statistician Datuk Seri Dr Mohd Uzir Mahidin said the growth in the index was supported by strong growth in the number of housing units approved, real imports of other basic precious and other non-ferrous metals, and the number of new companies registered.
Month-on-month (m-o-m), the LI rose 1.8% in March, compared with a 1.1% growth in the preceding month.
“The LI, which indicates the ability in anticipating the economic direction in advance, pointed at better economic prospects through the movement of the growth rate of a smoothened LI,” said Mohd Uzir during a virtual press conference earlier today.
He added that while uncertainty persists, the near-term economic outlook is encouraging, in line with optimism about Malaysia’s merchandise trade performance as well as the positive performance of the manufacturing sector, the motor vehicle sub-sector and commodity prices.
He pointed out that China, Malaysia’s top trading partner, also recorded a sturdy gross domestic product (GDP) growth of 18.3% in the first quarter of 2021 (1Q21), which may augur well for Malaysia.
The Coincident Index (CI), which measures the current economic performance, showed a better y-o-y growth of 4.1% from -2% in February 2021, and increased 0.1% m-o-m, supported by an increase in real contributions to the Employees Provident Fund (1.4%), total employment in the manufacturing sector (+0.5%) and capacity utilisation of the manufacturing sector (+0.2%).
Minister in the Prime Minister’s Department (Economy) Datuk Seri Mustapa Mohamed said the positive performance of the LI was in line with the 6% GDP growth recorded in March.
“If the government decided on a total lockdown starting May 25 until June 7, 2021, similar to what happened during the MCO 1.0, economic growth momentum will be affected. The government expects its 2021 economic growth forecast of between 6% and 7.5% to be achieved if the health crisis is stabilised after the end of the current MCO 3.0,” the minister said.
He added that a total lockdown will result in a rise in the unemployment rate and an increase in the number of low income households, while the performance of businesses will be negatively affected.
Meanwhile, following engagements with industry, micro businesses, and small and medium enterprise (SME) representatives, as well as hawker associations on Saturday and Sunday, Mustapa said the majority of them agreed with the government’s decision to enforce the MCO 3.0.
However, he noted that the current LI was based on data collected up to March 2021, and that a study will be carried out by the tax department and SME Corp to assess the impact of the MCO 3.0 on SMEs, which will provide some indication of the impact of the current MCO.
Mohd Uzir said the country had learned several lessons since the MCO 1.0 and pointed out that economic sectors are allowed to operate under the MCO 3.0.
“We anticipate that this will continue to stimulate economic momentum. We cannot abruptly stop the momentum [with a total lockdown]. We believe there is potential for the economy to make its recovery journey,” he said.
