KUALA LUMPUR, Oct 25 — Fitch Solutions has revised Malaysia’s 2021 growth forecast to 1.5 per cent from its earlier estimate 0 per cent.
This comes as Malaysia’s daily Covid-19 cases have slipped from a peak of 24,599 on August 26 to just 6,210 on October 21 with a downtrend that appears to be entrenched coupled with the reopening of international travels to Langkawi most recently.
In a brief commentary today, the research unit of the Fitch Group noted that its previous forecasts had assumed that Covid-19 restrictions would not be removed until daily cases fell below 4,000.
“In view of these positive developments, we at Fitch Solutions have revised upward our 2021 real Gross Domestic Product (GDP) growth forecast from 0.0 per cent to 1.5 per cent.
“Our forecast for 2022 remains at 5.5 per cent for now, with the economy likely to post a stronger recovery thanks to higher vaccination rates,” it said.
With the improving situation, Fitch Solutions opined the government will now probably be able to honour its pledge to fully reopen the economy by this month’s end as the removal of domestic restrictions will provide a strong boost to the retail and services sector over the remainder of the year.
It also cited Google’s mobility data which revealed a sharp improvement in foot traffic to retail outlets, parks and workplaces as restrictions have been gradually lifted by the government.
“This means that Third Quarter 2021 is likely to have performed better in terms of private consumption than we previously expected and the revision reflects this.
Having said that, Fitch Solutions later emphasised that the revision was a preliminary adjustment as it awaits a clearer indication as to the health of the economy with the release of Third Quarter 2021 real GDP growth results on November 12.
“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.
“In neighbouring Singapore, for example, the government was forced to reimplement tighter restrictions in late September.
“If the Malaysian authorities are forced to abandon their reopening plan, this would delay the economic recovery into 2022,” it said.