KUALA LUMPUR, Aug 13 — MIDF Research has maintained its gross domestic product (GDP) forecast for Malaysia at 4.6 per cent but with downside risks to the growth outlook due to extended lockdown measures as well as the possible worsening of the Covid-19 situation.

"The stronger growth in the second quarter of 2021 (Q2 2021) pushed up the first half of 2021 (H1 2021) growth to 7.8 per cent year-on-year (y-o-y) versus the 3.1 per cent decline in the second half of 2020 (H2 2020), which is higher than our estimate of 7.1 per cent,” it said in a research note today. "Although this could push GDP growth for the year higher, we view the prolonged lockdown increases the risk for the third quarter to return to a contraction.”

However, MIDF Research is optimistic that the encouraging progress in the national vaccination programme will help to relieve pressure on the national healthcare system and increases the likelihood of achieving herd immunity by the fourth quarter of this year.

"With many states already transitioned to the next phases in the National Recovery Plan (NRP), the gradual relaxation of restrictions on the economy and for fully vaccinated individuals will result in improving economic activities in the latter part of the year. The easing of restrictions and the potential increase in pent-up demand will support for the economy to continue recovering from the fourth quarter and going into 2022,” it said.

While the research house expects external demand will continue to support growth, it acknowledges that the recent spike in Covid-19 cases in other parts of the world could influence trade outlook, at least in the near term.

Based on the monthly GDP growth data, Malaysia’s economy contracted 4.4 per cent y-o-y in June as the country entered the first month of the nationwide full movement control order.

"This indicates that economic activities weakened further from the previous two months as the GDP growth slowed from 40.1 per cent in April to 19.8 per cent in May,” it said.

Bank Negara Malaysia has revised downwards Malaysia’s economic growth for 2021 to be between 3 and 4 per cent mainly due to the re-imposition of the nationwide Covid-19 containment measures. — Bernama