MIDF EXPECTS GDP TO GROW 5.4 PCT, REVERSING THE FALL IN 2020

KUALA LUMPUR, March 1  -- MIDF Research expects the nation’s gross domestic product (GDP) to grow by 5.4 per cent this year, reversing the fall in 2020 in line with the resumption of domestic and global economic activities.

However, it said the economic performance in the first quarter of 2021 (Q1 2021) will be affected by the ongoing Movement Control Order (MCO) and renewed restrictions in key countries due to surging COVID-19 cases, which limits mobility and led to slower demand.

“In addition, we foresee a temporary setback to the labour market recovery, as some businesses may hold hiring due to lower business activities during the MCO 2.0 period, which will affect income prospects.

“By factoring in the restrictions in Q1 2021 in particular, we had revised our full-year GDP growth forecast downward to 5.4 per cent year-on-year (y-o-y) from seven per cent y-o-y previously, anticipating the economy to attain a more gradual normalisation,” MIDF said in a note today.

Nevertheless, MIDF believes the impact will be much lesser than the first MCO last year, given the less-restrictive measures which allow most businesses to operate, while the impact on private consumption could be cushioned by online spending.

With positive elements such as vaccine distribution and expansionary fiscal and monetary policies, both demand and supply sides are expected to improve particularly from Q2 2021 onwards, it said.

“In addition, solid growth expectation for our key trading partners such as China and the United States will assist Malaysia’s economic recovery via higher exports demand.

“Downside risks to the estimate include hiccups in the national vaccination plan, political situation, price volatility in commodity prices, protectionism and geopolitical tensions,” it added.

-- BERNAMA