Malaysia’s economy is set to continue improving, analysts project, but on a gradual term as there has been a resurgence of Covid-19 cases in the country and also globally, analysts commented following the release of Malaysia’s 3Q20 GDP numbers. — Bernama photo
KUCHING: Malaysia’s economy is set to continue improving, analysts project, but on a gradual term as there has been a resurgence of Covid-19 cases in the country and also globally, analysts commented following the release of Malaysia’s 3Q20 GDP numbers.
According to the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research), based on current developments and indicators, the economy is set to continue improving.
“However, we expect it to be on a gradual term as the sentiments are still weak due to resurgence of Covid-19 cases in the country and also globally, with other downside risk emerging such as the political situation, rising protectionism and geopolitical tensions,” MIDF Research said.
“Domestically, the rise in Covid-19 cases has pushed most of the states to Conditional Movement Control Order (CMCO).
“While we view the current CMCO to be less stringent than what we had previously and that most of the economic activities are allowed to continue operating according to the standard operating procedures (SOPs), it will still has some impact on the demand due to physical movement restrictions.”
The research arm recognised that the major impact of CMCO on the economy is mainly from weaker consumer spending and its spillover effect to the services industry, particularly consumer-related sub-sectors such as retail trade, restaurants, hotels, travel, education and recreation services.
“While international borders remain closed, the support coming from domestic tourism activities will be curtailed to some extent following the CMCO.”
Nevertheless, the research arm believed the risk to consumption would be somehow cushioned by growing online purchases facilitated by availability of e-commerce platforms, home delivery services and online financial services such as e-wallet and online banking.
“In addition, stimulus packages announced on top of cumulative 125bps cut in overnight policy rate (OPR) will continue providing support to the recovery.”
Meanwhile, looking at the larger-than-expected surplus in the third quarter of 2020 (3Q20), MIDF Research expected the current account surplus for 2020 to be higher vis-a-vis its previous projection.
The research arm recapped that Malaysia’s quarterly current account surplus rose to RM26.1 billion in 3Q20, marking it the largest surplus since 4Q11.
As such, the research arm revised its current account surplus to be at 3.6 per cent of gross domestic product (GDP) in 2020 on the sustained surplus in the goods account. To note, the previous forecast was at two per cent while 2019 was at 3.3 per cent.
“Nevertheless, a weaker recovery in the external demand will be a downside risk to our call, as the spike in Covid-19 cases in other parts of the world including Malaysia may cause global demand to weaken if authoritiess in many countries decide to re-impose tighter restrictions and lockdowns that could hurt business and consumer activities.”