KUALA LUMPUR, Aug 2 — MIDF Research has maintained its 2021 gross domestic product (GDP) growth forecast for Malaysia at 4.6 per cent, taking into account both recent developments and the plausible events when the economy reopens in the future.
In a research note today, it said the current tight restrictions on the economy, people’s mobility and social activities are seen as temporary drag as it expected Malaysia’s economy will resume its recovery when the public health situation improves.
“While the fight to contain the pandemic is still ongoing, there are few positive developments such as the encouraging vaccination rate which increases the likelihood of reaching the herd immunity target by the fourth quarter of 2021 (Q2 2021),” it said.
Furthermore, the research firm said many states have been placed under the second phase of the National Recovery Plan (NRP), while some relaxation of the restrictions are allowing more businesses to reopen and increase their activities.
“We could see upside surprises from potential rise in pent-up demand when the economy reopens, which we anticipate will take place in the final quarter of this year if the transition towards the next phases of NRP can be achieved,” it said.
Apart from recovering demand, MIDF Research expected the eventual relaxation of restrictions would allow more businesses to resume their operations.
Moreover, it said the economic recovery will also be supported by the ongoing accommodative monetary policy, as well as increased fiscal spending as more programmes under the fiscal stimulus and Budget 2021 are disbursed and implemented.
However, it said the deteriorating sentiment will continue to hurt domestic spending, while manufacturing output and export performance could be impacted especially in the first half of July 2021 due to the imposition of Enhanced MCO (EMCO) in certain localities in Selangor and Kuala Lumpur.
“We view downside risks to outlook will be mainly from the extension of the lockdown and the worsening local Covid-19 situation which will continue to hurt confidence in the near term.
“Furthermore, the rise in Covid-19 cases in other parts of the world could also affect the strength of the global economic growth in the second half of 2021,” it added. — Bernama