Low OPR and fiscal stimulus packages particularly through rakyat-centric measures such as i-Sinar, BPR, wage subsidy and loan moratorium are expected continue to provide support to consumer spending, analysts observed. — Bernama photo
KUCHING: Private consumption and the services sectors have been projected to advance in 2021, despite analysts anticipating the first quarter of 2021 (1Q21) distributive trade performance to be disrupted by the second Movement Control Order (MCO 2.0).
The research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) recapped in its distributive trade review for January 2021 that Covid-19 has stifled domestic demand in 2020 as consumers reduced spending and tightened their purse string due to high uncertainty.
Looking ahead into 1Q21, distributive trade performance is anticipated by MIDF Research to be disrupted by the MCO 2.0 which limited consumers’ outside activities and businesses’ operations, hence reducing demand.
“This is expected to continue going into 1Q21 with MCO 2.0 in place which makes consumers stay home and limit outside activities,” MIDF Research said.
“It will also slow down domestic tourism activities to some extent while international borders remain closed.”
In addition, the research arm foresees a temporary setback to the labour market recovery as some businesses might hold hiring due to the lower business activities during the MCO 2.0 period which will affect income prospects.
“This was supported by the latest consumer sentiment index by MIER for 4Q20 which were down by 6.3 points to 85.2, the lowest reading in three quarters, pointed to deteriorating consumer confidence and a cut into their purchasing power amid challenging labor market conditions which probably rein their spending in upcoming months.
“Nevertheless, as National Covid-19 Immunisation Programme has kicked off and vaccination rollout will continue by phases throughout the year, private consumption is anticipated to increase and also benefiting from low base in 2020 which will be more evident from 2Q20 onwards.
“The temporary disruption to offline spending with restrictions in place to curb increasing Covid-19 cases in the country could also be mitigated by online spending.”
According to MIDF Research, low overnight policy rate (OPR) and fiscal stimulus packages particularly through rakyat-centric measures such as i-Sinar, Bantuan Prihatin Rakyat (BPR), wage subsidy and loan moratorium will continue to provide support to its estimate.
The research arm opined that consumer inflation is expected to go up this year but remain benign and supportive to consumption.
“Services sector in general will also return to positive territory this year but some services involving hotel and aviation are likely to still be pressured by the international border closure.”