Political changes not expected to derail current economic policies, recovery plans, vaccination progress — UOB Research

KUALA LUMPUR (Aug 23): The political changes in Malaysia are not expected to derail the current economic policies, recovery plans and vaccination progress, said UOB Research in a report. 

As at Aug 22, 55.6%, or 18.26 million, of Malaysia’s adult population have been fully vaccinated while 78%, or 13.02 million, have received at least one dose of vaccine. 

UOB Research highlighted that larger parts of the economy and more sectors are gradually reopening. Currently, six states — Penang, Perak, Terengganu, Kelantan, Pahang and Sabah — have transitioned to phase 2 of the National Recovery Plan (NRP) while Perlis, Sarawak and Labuan are under Phase 3 of the NRP. 

While Kuala Lumpur and Selangor remain in Phase 1 of the NRP, more restrictions were loosened on business operations and social activities recently.  

UOB Research also pointed out that Malaysia has one of the highest rates of vaccination roll-outs based on vaccination doses. It said the vaccination timeline expects to achieve the target of 100% of Malaysian adults fully vaccinated by October. 

“Going by this assumption, we expect most economic and social sectors to reopen by 4Q21 that paves the way for a rebound in gross domestic product (GDP). Positive spillovers from external demand will also provide further impetus to the recovery pace ahead,” said the research house.  

Nonetheless, UOB Research said it will continue to watch how the external uncertainties surrounding the Covid-19 resurgence unfolds in major countries, the expected US Federal Reserve quantitative easing tapering in the later part of this year and the pace of China’s economic slowdown. 

“We maintain our full-year GDP outlook of 4% for 2021 and expect the key policy rate to be kept unchanged at 1.75% for the rest of the year,” it said. 

On Aug 20, the King announced the appointment of Datuk Seri Ismail Sabri Yaakob as the ninth Prime Minister (PM) of Malaysia. This came after Tan Sri Muhyiddin Yassin and the entire Cabinet failed to get the opposition on board for a bipartisan vote of confidence. 

UOB Research said the next hurdle will be the tabling of a motion of confidence when the parliament reconvenes on Sept 6. 

“Markets will also focus on the selection of deputy PM and key positions in the new cabinet to take charge of finance, trade and investments, health, and domestic affairs,” it said. 

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