Fitch Solutions has revised upward the gross domestic product (GDP) growth forecast for Malaysia in 2021 to 1.5% amid improvement in the country’s COVID-19 situation.
Daily COVID-19 cases in Malaysia have declined from a peak of 24,599 on 26 August to just 6,210 on 21 October, and a downtrend appears to be entrenched, reported Malay Mail.
Moreover, the government had recently reopened international travels to Langkawi.
The research unit of Fitch Group explained that its previous forecasts are based on the assumption that COVID-19 restrictions would not be lifted until daily cases dropped below 4,000.
“In view of these positive developments, we at Fitch Solutions have revised upward our 2021 real GDP growth forecast from 0.0% to 1.5%,” it said.
“Our forecast for 2022 remains at 5.5% for now, with the economy likely to post a stronger recovery thanks to higher vaccination rates.”
With the improving situation, Fitch Solutions believe the government would honour its pledge of fully reopening the economy by the end of this month, given that the removal of domestic restrictions would provide a strong boost to the services and retail sector for the rest of the year.
Fitch Group’s research arm also pointed to the mobility data of Google, which showed a significant improvement in foot traffic to parks, workplaces and retail outlets amid the government’s gradual easing of restrictions.
“This means that the third quarter of 2021 is likely to have performed better in terms of private consumption than we previously expected and the revision reflects this,” it said as quoted by Malay Mail.
However, Fitch Solutions underscored that the revision is only a preliminary adjustment as it waits a clearer picture of the economy with the release of Q3 2021 real GDP growth results on 12 November.
“That said, we continue to caution that downside risks remain, particularly the possibility that the removal of restrictions will result in a surge in infections that forces the government to pause reopening plans,” it said.
It cited Singapore, in which the government was forced to reintroduce tighter restrictions in late September.
“If the Malaysian authorities are forced to abandon their reopening plan, this would delay the economic recovery into 2022,” said Fitch Solutions.