KUALA LUMPUR – The Malaysian economy is expected to be buoyed by external demand, particularly exports of electronic products to China and Singapore, amid the global shortage of semiconductors, said Moody’s Investors Service.
In a note today, Moody’s said the oil and gas industry is also expected to rebound after last year’s record low prices, providing a boost to the country as a net exporter of oil.
“However, uneven roll-outs of vaccines domestically and in the region will temper growth prospects and delay the rebound in the tourism industry.
“The unemployment rate also remains relatively high at almost 5%, compared with the average 3% over the last five years,” it added.
Moody’s said inflation is expected to pick up this year, mainly thanks to higher oil prices, but noted that the central bank still maintains the policy space to hold rates low into 2022.
On Bank Negara Malaysia’s decision to maintain the 1.75% overnight policy rate during its Monetary Policy Committee meeting yesterday, Moody’s said the decision was expected due to the roll-out of vaccines and ongoing fiscal support.
It said although domestic containment measures in the first quarter of the year (Q1 2021) will dampen economic growth, the strict movement control order (MCO) has since been eased, and consumer spending is expected to pick up, moving forward.
The number of new Covid-19 infections has also been falling from its peak of almost 6,000 in January to about 2,000 currently.
“External demand for electronics, as well as recovering oil prices, will also bolster the outlook.
“Downside risks, however, still remain from uneven vaccine rollouts domestically and overseas, as well as volatility in commodity prices,” it added.
Malaysia announced that it will be lifting the MCO in Kuala Lumpur, Selangor, Johor and Penang starting from today, effectively placing most of the country under the less stringent conditional MCO.
Moody’s said altogether, the four states make up almost 60% of the country’s economic activity, and easing restrictions will likely buoy consumer spending and boost growth in Q2 2021.
“Travel between districts will now be allowed, and more businesses will be permitted to resume operations.
“However, interstate travel is still banned, which will curb movement in the economically important Klang Valley, which spans Kuala Lumpur and Selangor,” it noted. – Bernama, March 5, 2021
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