Bank Negara Malaysia (BNM) may slash the Overnight Policy Rate (OPR) by another 25 basis points (bps) at the upcoming policy meeting on 4 March, according to RHB Research.
This comes as the research house anticipates a 2.6% contraction in the gross domestic product (GDP) in the first quarter of 2021 (Q1 2021).
“The contraction in GDP in Q4 2020 is likely to continue in Q1 2021 as the imposition of the lockdown measures continues to affect private consumption and investment,” it said as quoted by Bernama.
In Q1 2021, RHB Research expects the cyclically adjusted fiscal stimulus to be weak, while the output gap is forecasted to remain wide, with credit conditions tightening in the property, construction as well as small and medium enterprises (SME) sectors.
With this, RHB Research believes that the policy stance of BNM will turn dovish on 4 March.
“To address the aforementioned tight credit conditions in some sectors, we believe the central bank will also announce sector-specific policies in Q1 2021. These policies could include an extension of loan moratoriums beyond June 2020,” it said.
“Further relief measures for SMEs could also be announced. As such, we also maintain our view that the balance of risks is tilted towards another 25 bps OPR cut in Q2 2021.”