Bank Negara Malaysia (BNM) anticipates the Malaysian economy to return to 2019 pre-pandemic levels by mid-2021 with gross domestic product (GDP) slated to expand by 6-7.5% this year.
Central bank governor Datuk Nor Shamsiah Mohd Yunus conceded that the year started off with tighter containment measures in most parts of the country compared with the end of last year.
“This is likely to have a slightly larger drag on growth in the first quarter but with more sector allowed to operate under the movement control order 2.0 (MCO 2.0), the impact on growth is not anywhere close to the impact on growth seen in Q2’20 during the stricter MCO 1.0,” she told the media at the virtual launch of the BNM Annual Report 2020, Economic and Monetary Review 2020 and Financial Stability Review Second Half 2020, on Wednesday.
Shamsiah has identified several key drivers for the Malaysian economy, primarily the rebound in global growth this year that will translate into a strong export recovery, particularly in electric and electronic products, on the back of a technology upcycle and a pickup in investment activities following a lift in movement restrictions as well as favourable demand conditions.
For 2021, the central bank projected private consumption to rebound by 8%, supported by a gradual improvement in labour market conditions from easing of containment measures, improved consumer sentiment on the back of vaccine rollout and continued policy support that remains available particularly for vulnerable households.
Ongoing multi-year infrastructure projects – such as the East Coast Rail Link, MRT 2, LRT 3 and the Pan-Borneo Highway – are expected to contribute to a strong rebound for the construction sector this year.
Shamsiah explained that the forecast assumed that herd immunity against the Covid-19 pandemic will only be achieved in the first quarter of next year. “Furthermore, we assumed that the international borders will remain closed for this year and the MCO will be highly targeted.”
She said while heightened downside risks to growth remain, the immediate policy focus of the central bank is to facilitate a strong and sustainable recovery and minimise permanent output losses. “We also expect the positive growth momentum to be sustained into 2022, supported by further expansion in global growth.”
For the year ahead, BNM deputy governor Datuk Abdul Rasheed Ghaffour said the outlook risks remain tilted to the downside, citing ongoing uncertainties surrounding the pandemic and potential challenges that might affect vaccine rollout globally and domestically.
He cited the blockage of the Suez Canal by a giant container ship, which was refloated on Monday, as an example of commodity supply shock that can materialise anytime and anywhere and affect global trade.
“If such downside risk materialises, growth is expected to be closer to the lower bound of our range,” said Rasheed.
On the flip side, he identified favourable developments surrounding the distribution and effectiveness of the vaccines, which could lift sentiments and consumption spending and accelerate the rollback of containment measures as upsides to the growth projection.
The deputy governor said favourable progress on the vaccination would lift income and promote a faster recovery in high-touch sectors, such as tourism and transport.
- The Sun Daily