Maybank says Malaysian economic rebound on track but risk tilted to downside on MCO

KUALA LUMPUR (May 12): Maybank Investment Bank Bhd economists said today while the outlook of the Malaysian economy rebounding in 2021 is on track, the risk to growth remains tilted to the downside due to the latest round of the Covid-19-driven movement control order (MCO 3.0) enforced nationwide.

In a note today, Maybank Investment Bank economists Suhaimi Ilias, Dr Zamros Dzulkafli, Ramesh Lankanathan and William Poh Chee Keong said they are keeping the research firm's full-year 2021 economic growth forecast for Malaysia as measured by gross domestic product (GDP) at 5.1% for the time being. 

"Review of our forecasts will be guided by the dynamics of the pandemic and containment measures, vaccination progress and input from our monthly GDP estimates. The official forecast is [within the] range of +6% to +7.5%," they said.

The Malaysian economy registered a decline of 0.5% in the first quarter of 2021 (1Q21) from a year earlier, supported mainly by an improvement in domestic demand and export performance, particularly for electrical and electronic products, as the country contended with the impact of the MCO and continued closure of international borders to curb the spread of the Covid-19 pandemic, according to Bank Negara Malaysia’s (BNM) statement yesterday.

"The Malaysian economy registered a smaller decline of 0.5% in 1Q21 (4Q20: -3.4%). On a quarter-on-quarter (q-o-q) seasonally-adjusted basis, the economy registered a growth of 2.7% (4Q20: -1.5%),” BNM said.

Today, the Maybank Investment Bank economists said the outlook of the Malaysian economy rebounding in 2021 is on track after a recession last year as real GDP’s year-on-year (y-o-y) contraction narrowed further in 1Q21 after shallowing in the second half of 2020 (2H20) from a slump in 2Q20. 

"Furthermore, the base effect that boosted March 2021 GDP will continue to be at work, especially in 2Q21,” they said.

CGS-CIMB also sees downside risk to its full-year GDP growth forecast of 5.7%

Meanwhile, CGS-CIMB Securities Sdn Bhd economists Michelle Chia and Lim Yee Ping wrote in a note today that the research house still expects Malaysia to record sequential economic gains for the remaining quarters of 2021, although the extended strict MCO and recurring waves of Covid-19 infections pose downside risk to its full-year GDP growth forecast of 5.7% for the country.

"We estimate each month of the MCO 3.0 to subtract 0.3 percentage point from headline GDP growth. In the interim, continuing disbursements of fiscal measures, such as wage subsidies, cash transfers and credit facilities, are expected provide a partial buffer.

"In addition, i-Sinar withdrawals, which BNM estimates to contribute one to three percentage points to its baseline GDP growth forecast for 2021, began in March and will provide six months of cash flow relief to approved EPF (Employees Provident Fund) members,” the economists said.

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