KUCHING: MIDF Amanah Investment Bank Bhd’s research arm (MIDF Research) expects Malaysia’s economic outlook to continue recovering based on its current leading index (LI), with the economy projected to grow at 5.4 per cent in 2021, compared to -5.6 per cent in 2020.
According to the Department of Statistics Malaysia (DOSM), Malaysia’s LI continued to record positive growth in February 2021 from a year earlier.
DOSM’s latest report on the leading, coincident and lagging indexes for February 2021 revealed that the increase of 8.5 per cent to 111.2 points in the reference month from 102.5 points in February 2020 was buoyed by Bursa Malaysia Industrial Index, reflecting a growth in Health Care Index, Transportation and Logistic Index and Utilities Index.
“We expect the economic outlook to continue recovering, as suggested by the encouraging trend in LI, which continued to indicate that Malaysia’s near term economic prospect remains upbeat,” MIDF Research said.
“Fiscal stimulus from the government and the low interest rate environment will continue to support the economic recovery.”
MIDF Research highlighted that despite weakness in the early part of 2021 due to the Movement Control Order (MCO) 2.0, Malaysia’s economy is projected to grow at 5.4 per cent in 2021, compared to -5.6 per cent in 2020.
The research arm expected the enforcement of MCO 2.0 to mainly affect domestic consumption spending while businesses were mostly allowed to continue operation.
“With the gradual easing of restrictions and with the end of MCO 2.0, we expect economic activities will improve from the second quarter of 2021 (2Q21) onwards, which will be supported by fiscal stimulus from the government, accommodative monetary policy, and improved sentiment following the ongoing vaccination programme.
“We foresee growth to be rather strong in 2Q21 mainly due to the base effect as Malaysia’s economic growth plunged in 2Q last year when MCO was first introduced.
“This can be an upside risk as the actual numbers can be stronger than anticipated, as shown by the recent data releases for March 2021.
“Exports will continue to be supported by growing external demand from major trading partners.”
Despite indication of recovering economic activities, MIDF Research remained cautious that the ongoing Covid-19 pandemic will pose downside risk to growth outlook.
“There is an indication that Malaysia is experiencing another new wave of Covid-19 infections as new cases had been trending upward in the recent weeks.
“In addition, the macroeconomic outlook can also be adversely impacted by the potentially slow progress in vaccine administration locally and abroad.”