ECONOMISTS are forecasting a contraction for both the 4Q 2020 gross domestic product (GDP) as well as that for the entire of last year.
The Department of Statistics is scheduled to announce the country’s GDP performance tomorrow (Feb 11).
TA Securities Research foresees a contraction of -3.9% year-on-year (yoy) in 4Q 2020 from its initial optimistic estimation of +1.1% yoy.
That will lead to a higher GDP contraction of -5.7% yoy for the whole year as compared to its previous forecast of -4.5% yoy.
“If materialises, that would be lower than Bank Negara Malaysia’s (BNM) forecast range of -3.5% year-on-year (yoy) to -5.5% yoy and also be weaker than the Finance Ministry’s target of -4.5% yoy,” wrote economists Shazma Juliana Abu Bakar and Farid Burhanuddin in an economic update.
According to both economists, the risks in 2021 are skewed to the downside as the persistently rising cases of COVID-19 pandemic have led to the re-imposition of the movement control order (MCO 2.0) nationwide (except Sarawak) from Jan 13 till Feb 18.
“Nonetheless, we believe our projection of 6.4% for this year is still intact as the Government allowed most of the economic sectors to operate during the lockdown,” justified the economists.
“On top of that, the recent leading index (LI) which normally tracks economic activities three to six months ahead suggests that economic recovery is in sight as LI rose for seven consecutive months at 7.1% yoy in November.”
Meanwhile, CGS-CIMB Research expects Malaysia’s GDP to decline by 4.0% yoy in 4Q 2020, thus implying an annual decline of 5.7% in 2020 (as opposed to its earlier forecast of -5.0%).
“We downgrade our 2021 GDP growth forecast to 5.0% from 7.5% previously to factor in MCO 2.0 restrictions and the recent amendments to allow more types of economic activities to resume but under stricter SOPs until March 2021,” projected economists Michelle Chia and Lim Yee Ping.
“The downgrade also reflects strains on household incomes and the labour market. We reiterate our view that the short-term economic headwinds may prompt BNM to reduce the overnight policy rate (OPR) by 25 basis points in 1H 2021.” – Feb 10, 2021
