MALAYSIA’S 2Q 2021 gross domestic product (GDP) is on course to post 11.7% (1Q 2021: -0.5%) growth, backed mainly by the manufacturing sector’s 2Q 2021 record breaking 26.3% year-on-year (yoy) growth which was supported by robust external demand.
Despite the impact of the prolonged full movement control order (FMCO) which has weighed on domestic demand, Kenanga Research expects manufacturing output to remain supported by export-oriented industries amid solid external demand.
“Furthermore, manufacturing production will likely recover over 2H 2021 as restriction measures have gradually eased; MCO relaxations for those fully vaccinated and for (the re-opening of) economic sectors will continue to be announced in the near-term,” projected head of economic research Wan Suhaimie Wan Mohd Saidie and team in an economic update.
“Nevertheless, downside risks persist as COVID-19 cases remain elevated as the highly infectious Delta variant continues to spread.”
The Department of Statistics Malaysia (DOSM) is set to announce the 2Q 2021 GDP result this Friday (Aug 13).
To re-cap, Malaysia’s Industrial Production Index (IPI) was resilient in June – thanks to the sustained turnaround in mining – that offset the drop in manufacturing and electricity components.
Despite the FMCO’s imposition, IPI rose by 1.4% yoy in June, driven by a favourable base effect (June 2020: -0.4%) given the economy was still recovering from the strong COVID-19 headwinds last year (however, this marks a sharp slowdown against 26.1% in May).
For the whole year, however, Kenanga Research has revised downward its 2021 GDP growth forecast to 4%-5% from 5%-6% previously (2020: -5.6%) considering the worsening domestic COVID-19 condition and the extended FMCO measures.
Meanwhile, TA Securities Research also expects a rebound in Malaysia’s 2Q 2021 GDP as suggested by encouraging performances of the April-June 2021 economic indicators.
“So far, the encouraging economic indicators suggest that the 2Q 2021 GDP may outperform our forecast of 6.1% yoy,” opined economists Shazma Juliana Abu Bakar and Farid Burhanuddin.
“We will get more clues when the statistic department releases its 2Q 2021’s figure for volume of services and the performance of wholesale and retail trade.”
Moving forward, the research house expects the encouraging progress made in the National COVID-19 Immunisation Programme (PICK) and gradual re-opening of economic sectors to support manufacturing activities to grow in tandem with demand recovery especially in 4Q 2021.
“While the pace of growth may be slow, especially in 2H 2021 as base effects will likely fade, we foresee a better overall production growth for this year at 8.7% yoy compared with a 4.2% contraction in 2020,” added TA Securities Research. – Aug 10, 2021
