KUALA LUMPUR – MIDF Research expects the nation’s gross domestic product (GDP) to grow by 5.4% this year, revising the forecast down from its earlier 7% projection.
It said slower demand due to limited mobility caused by the current iteration of the movement control order (MCO 2.0) and renewed restrictions thanks to surges in Covid-19 cases in key countries, will drag down economic performance in the first quarter of 2021 (Q1 2021).
“In addition, we foresee a temporary setback to the labour market recovery, as some businesses may hold hiring due to lower business activities during the MCO 2.0 period, which will affect income prospects.
“By factoring in the restrictions in Q1 2021 in particular, we had revised our full-year GDP growth forecast downward....anticipating the economy to attain a more gradual normalisation,” MIDF said in a note today.
Nevertheless, MIDF believes the impact will be much lesser than the first MCO last year, given the less restrictive measures which allow most businesses to operate, while the impact on private consumption could be cushioned by online spending.
With positive elements such as vaccine distribution and expansionary fiscal and monetary policies, both demand and supply sides are expected to improve particularly from Q2 2021 onwards, it said.
“In addition, solid growth expectations for our key trading partners such as China and the United States will assist Malaysia’s economic recovery via higher export demand.
“Downside risks to the estimate include hiccups in the national vaccination plan, (the) political situation, price volatility in commodity prices, protectionism and geopolitical tensions,” it added. – Bernama, March 1, 2021
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