May 10, 2021

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The government saw giving priority to fiscal measures and incentives to support the Malaysian economy


lease: If the Covid-19 cases in Malaysia rise to a level that impedes the economic recovery, the government will prioritize fiscal measures and incentives to support the economy, although there is still room for Bank Negara Malaysia (BNM) to reduce the overnight policy rate (OPR) by at least 25 points. Basis, estimated by Kenanga Research.

She said that the Malaysian Central Bank, similar to the US Federal Reserve, had recognized the need for an accommodative stance on monetary policy through 2021 given the uneven pace of recovery and downside risks to the economic outlook.

“This is in line with our household view that BNM will keep OPR unchanged at 1.75% for the rest of the year, especially given the recent easing of Covid-19 restrictions, the ongoing vaccination campaign in Malaysia and the additional Pemerkasa stimulus of the RM20.0 billion package,” Kenanga Research said In a report.

Despite indications of economic activity recovering, MIDF Research remains cautious that the current Covid-19 pandemic will pose downside risks to Malaysia’s growth outlook.

“There is an indication that Malaysia is witnessing another new wave of Covid-19 infections as new cases have been trending up in recent weeks. In addition, the macroeconomic outlook could also be adversely affected by the potential slow progress in vaccine management domestically and abroad.” .

MIDF Research has forecast a GDP growth of 5.4% in 2021 for Malaysia despite weakening in the first part of the year due to the motion control order 2.0 (MCO 2.0).

“We expect the implementation of MCO 2.0 to mainly affect domestic consumer spending while mostly companies are allowed to continue operating,” she said.

Against the backdrop of easing restrictions and the end of MCO 2.0, Research House predicted an improvement in economic activity in the second quarter of 2021 (Q2 21) onwards, buoyed by fiscal stimulus from the government, accommodative monetary policy, and an improvement in sentiment thereafter. Ongoing vaccination program.

For the second quarter of Year 21, I expected moderately strong growth, mainly due to the lower base effect as Malaysia’s economic growth declined in the same quarter of the previous year when MCO was first introduced.

MIDF Research indicated that this could be a bullish risk as the actual numbers could be stronger than expected, as evidenced by recent data releases for March 2021, as exports will continue to be supported by increased external demand from major trading partners.

However, Fitch Solutions revised its 2021 GDP growth forecast for Malaysia to 4.9% from 10.0% previously, due to the country’s ongoing restrictions on non-core retail trade, movement restrictions, and limited financial space to provide renewed support.

It said that the recent closure will lead to a return of unemployment, which will significantly reduce the chances of a recovery in domestic demand. The rating agency’s research unit added that government consumption is unlikely to provide meaningful support.

Fitch Solutions expects the unemployment rate in 2021 to remain high, as companies recover slowly and job opportunities increase.

As such, we expect unemployment to start declining only from the second half of year 21 onwards. Additionally, we see a slight uptick in inflation during 2021, as increased demand from the second half of Year 21 puts upward pressure on prices.

However, this level of inflationary pressure is not expected to have a significant impact on its outlook for Malaysia.