Maybank Investment Bank Bhd (Maybank IB) expects Malaysia’s economy to expand by 5.1% this year, following an expected contraction of 5.4% in 2020.
Suhaimi Ilias, Chief Economist of Maybank IB, believes the return to growth this year would be broad-based, both on the economy’s supply-side where all sectors are anticipated to post an expansion.
“The demand side will also see other components such as consumer spending, investment and trade to accompany public consumption in registering positive figures,” said Suhaimi as quoted by The New Straits Times.
Bank Negara Malaysia, on the other hand, is expected to keep the Overnight Policy Rate (OPR) at 1.75% in 2021, he said.
Suhaimi noted that the third wave of COVID-19, which saw a spike in cases, would continue to be a downside factor particularly in terms of border reopening.
“We have seen the plans of Singapore and Hong Kong to open their travel bubble have been suspended due to this,” he said.
He added that the COVID-19 pandemic had yet to be flattened considering the resurgence of new mutation in some parts of the world.
“Infection rate is severe due to the new wave. This has prompted some restrictions domestically, which has affected the mobility. Hence, there is sensitivity on restriction to gross domestic product (GDP),” said Suhaimi.
“GDP has a correlation to mobility. The issue of the pandemic is still ongoing.”
He explained that attracting foreign direct investments (FDI) to the country was dependent on several factors including political stability, the function of cost and policy overhang.
“We need to clear the policy for investment incentive. It does create situation as invest adopt wait and see to get the policy…With the 12th Malaysia Plan delayed to March, investors will adopt a wait and see attitude while awaiting for more clarity in terms of policy. As we see, the 2021 Budget has incentive for FDI with high-value,” he said.
Suhaimi anticipates the job market to remain volatile even as some have returned to work.
“However, our concern is on under-employment which will be an issue on the labour market,” he said.
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