(Bloomberg) — Malaysia’s economy could contract this year as the country struggles with a month-long coronavirus lockdown and a steep fall in commodity prices.Gross domestic product could shrink as much as 2% this year or grow as much as 0.5%, Malaysia’s central bank said Friday in its annual Economic and Monetary Review. The global pandemic has hit the country’s tourism sector hard and is set to dampen private consumption and investment, Bank Negara Malaysia said in the report, while volatile crude-oil prices will affect the country’s revenues.“We are mindful that the situation surrounding Covid-19 is highly fluid and the situation is constantly shifting,” Governor Nor Shamsiah Mohd Yunus told reporters in a briefing Friday, describing the revised outlook as the bank’s “best estimate” at this time. “Great uncertainty remains.”The looming contraction comes as Malaysia’s neighbors also are seeing this year’s growth expectations wiped out. Singapore says GDP could shrink by as much as 4% this year, while Thailand’s central bank expects the economy to contract 5.3%. Indonesia, while still forecasting some growth, warned that a contraction isn’t out of the question.Eventual RecoveryBNM last month cut its policy rate 25 basis points to 2.50% and slashed banks’ reserve requirement ratio by 100 basis points to 2% to bolster the economy amid the downturn. The government also has announced a series of stimulus measures amounting to 250 billion ringgit ($58 billion), including cash handouts and six-month bank loan deferrals.The central bank expects domestic growth to pick up toward the end of the year and normalize in 2021, supported by a recovery in global demand and continued policy measures. The forecast also envisions renewed growth in export-oriented sectors, improved consumer sentiment and a revival of tourism. The stimulus measures should add 2.8 percentage points to growth this year, Nor Shamsiah said.BNM’s revised outlook is gloomier than many analysts’, who expect Malaysia’s economy to grow about 2% this year as it confronts not just coronavirus but also political upheaval and an oil-price collapse. The World Bank recently cut its Malaysia forecast to a contraction of 0.1% this year, from an earlier expectation of 4.5% growth.“At least the fiscal and monetary authorities are doing the right thing and, in our case, BNM is willing to prescribe policies which are quite unconventional,” said Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid. He forecasts Malaysia’s economy to shrink 1.5% this year but warned that “its difficult to tell, as human emotion tends to gyrate, especially during periods of uncertainty.”Locked DownPrime Minister Muhyiddin Yassin imposed a nationwide lockdown March 18 as Malaysia contends with the largest number of virus cases in Southeast Asia. Schools, shops and some factories were forced to close and other rules were imposed, with the restrictions liable to be extended beyond the current April 14 limit.The pandemic has added to Malaysia’s woes after the economy grew 4.3% last year, its slowest pace since 2009.“The GDP forecast is a realistic one,” said Wellian Wiranto, an economist at Oversea-Chinese Banking Corp. in Singapore, who forecast Malaysia’s economic growth in a range from 2.5% contraction to 1.5% growth. “We continue to see further policy accommodation by BNM.”Nor Shamsiah told reporters the bank’s stance is “already accommodative.” OCBC says the central bank might lower rates by another 25 basis points at its May meeting, and says it could also move to inject liquidity via additional cuts to banks’ reserve ratios.The ringgit rose 0.2% to 4.3477 per dollar after the report’s release, reversing an earlier loss. The benchmark KLCI stock index was down 0.18% as of 11:05 a.m, while short-end government bonds gained.More from the report:Inflation is set to average -1.5% to 0.5% this year on lower global oil and commodity prices; that compares to an estimate of 2.0% in the state budgetNet exports are set to contract this year, narrowing the current account surplus to 1%-2% of GDP, from 3.3% last yearUpdated stress tests show Malaysia’s banks would prove resilient in severe market, credit, funding and liquidity shocksMarkets will remain volatile in the near term, with local investors serving as a stabilizerThe central bank’s forecast assumes crude oil at $25-$35 a barrel this year and crude palm oil at 2,000-2,200 ringgit per ton(Updates with analysts’ forecast in seventh paragraph and quote in eighth paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.