KUALA LUMPUR, May 11 (Bernama) — The country's economy recorded a contraction of 0.5 per cent in the first quarter of 2021, a sign of recovery from a decrease of 3.4 per cent in the preceding quarter with improvement seen in all economic sectors.

In the first quarter of 2020 onset of the pandemic, Malaysia recorded a gross domestic product (GDP) growth of 0.7 per cent.

All economic sectors recorded improvement during the quarter led by manufacturing, Bank Negara Malaysia Governor Datuk Nor Shamsiah Mohd Yunus said today.

The manufacturing sector grew stronger at 6.6 per cent in the first quarter 2021 compared to 3.0 per cent in the fourth quarter of 2020, while the services sector decreased 2.3 per cent during the quarter, but it is better then a decline of 4.8 per cent in the fourth quarter of 2020.

The agriculture sector grew marginally to 0.4 per cent, mining and quarrying sector improved to a negative 5.0 per cent and construction sector decreased 0.4 per cent.

Despite the the third round of the movement control order (MCO), Nor Shamsiah said Malaysia's GDP growth is likely to remain in the range of 6.0 per cent to 7.5 per cent in 2021.

"MCO 3.0 will be similar with MCO2.0 with most economic sector remains open," she told a virtual press conference here, today.

Despite the recent re-imposition of containment measures, she said the impact on growth is expected to be less severe than that experienced in 2020, as almost all economic sectors are allowed to operate.

"Overall, the growth recovery will benefit from better global demand, increased public and private sector expenditure as well as continued policy support. This will also be reflected in the recovery in labor market conditions, especially in the gradual improvement in hiring activity.

"Higher production from existing and new manufacturing facilities, particularly in the E&E and primary-related sub-sectors, as well as oil and gas facilities will provide a further impetus to growth.

The rollout of the domestic COVID-19 vaccine program will also lift sentiments and contribute towards recovery in economic activity. Nevertheless, the pace of recovery will be uneven across economic sectors," said the Governor.

Going forward, she said Malaysia is well positioned to continue benefiting from stronger global economic and trade activities.

"While the growth outlook continues to be shaped by developments surrounding the pandemic, the implementation of containment measures which are mainly aimed at curbing social activities and allow almost all economic sectors to operate, would minimize the impact on economic activity."

The country's current account of the balance of payments registered a surplus of RM12.3 billion or 3.3 pct of GDP.

As for headline inflation, it turned positive in the first quarter of the year and is expected to average 2.5-4.0 per cent for the year.