KUALA LUMPUR – MIDF Research revised its 2021 gross domestic product (GDP) growth forecast upward to 6.2% from 5.4% projected earlier.
In a note, it said recent GDP performance not only in Malaysia but other key countries suggested that the impact of renewed restrictions to contain the pandemic was less severe than anticipated as almost all economic sectors are still allowed to operate, while consumers are likely to spend online in the event of movement restrictions.
“On the imposition of the movement control order (MCO) 3.0, we expect it to have more or less the same impact as MCO 2.0 due to similar restrictions.
“Furthermore, strong external demand will also continue to support growth significantly, which we have recently revised upwards as well,” it said in its Economic Review First Quarter 2021 (Q1 2021) National Account report.
The research firm remained cautious on the downside risks to the estimate, which include hiccups in the national vaccination plan, political situation, price volatility in commodity prices, protectionism, and geopolitical tensions.
Separately, in its Economic Review Q1 2021 Balance of Payment report, MIDF Research forecast a current account surplus of 3.7% of GDP in 2021.
“We maintain our view that the size of the current account balance will decline to 3.7% of GDP this year (2020: 4.2%).
“Growing external demand will continue to support Malaysia’s trade sector,” it said.
MIDF Research said demand from major trading partners such as China, the United States, and other Asian countries, as well as robust global demand for semiconductor and rubber products would continue to support export growth this year, thereby sustaining the overall current account surplus.
Meanwhile, it also maintained its projection for the ringgit in 2021, expecting the local currency to appreciate and average at around RM4.05 per US dollar (2020: RM4.20 per US dollar) and move towards RM3.95 by the end of the year.
“This is based on assumptions that sustained current account surplus, high oil prices, and positive interest differentials (and therefore inflows into local financial securities) will support the ringgit’s strength this year,” it added. – Bernama, May 11, 2021
