Analysts Cut Malaysia’s GDP Forecast For 2021

June 1, 2021

Analysts Cut Malaysia’s GDP Forecast For 2021

While the impact of Malaysia’s two-week full lockdown is expected to be less severe than that witnessed during the first movement control order (MCO 1.0) last year, analysts have lowered their growth projections for 2021 gross domestic product (GDP) to between 4.4% and 5.4%.

The Sun Daily reported that CGS-CIMB expects Malaysia to register RM1 billion in economic loss per day for the two-week lockdown from 1 to 14 June, milder than the RM2.4 billion daily loss seen last year. It expects the impact to narrow to RM500 million per day during the limited reopening of phase 2.

“Imputing these assumptions for the six-week phase 1 and phase 2 and the additional month of phase 3 (10% capacity cut or RM400 million per day) leads to downside risk to our GDP outlook but we do expect some degree of policy support as well as pent-up demand to materialise when these restrictions are eventually relaxed,” according to the research house.

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To reflect this development, CGS-CIMB lowered its 2021 GDP forecast for Malaysia to 4.4% from 5.7%.

The research house expects the government to introduce stimulus of between RM20 billion and RM30 billion to support households and businesses affected by the restrictions.

PublicInvest Research, on the other hand, expects the two-week lockdown within the Klang Valley to slash 0.8% off the economy, bringing this year’s growth to 5.4%. And extending the lockdown to four or eight weeks could reduce GDP by between 1.4% and 2.9%, which works out to 4.7% and 3.1% growth, respectively.

“We are concerned that the improvement in labour market conditions may be delayed by the constant MCOs and resultant strains on businesses, now made worse by the implementation of a total lockdown,” said PublicInvest Research, citing Senior Minister (Security Cluster) Datuk Seri Ismail Sabri Yaakob, who shared that 2.8 million people may lose their jobs in case the government implement a total lockdown.

Nonetheless, the research house believes there will be no economic meltdown similar to that seen last year, noting that the period coincided with a global lockdown that decimated demand-supply dynamics.

Meanwhile, MIDF Research also expects the impact of the total lockdown to be less severe than last year’s MCO 1.0 lockdown. It also revised its earlier projection of 6.2% GDP growth to 4.6%.

 

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