Standard Chartered (StanChart) expects Malaysia’s gross domestic product (GDP) growth to rebound to 7.5 per cent in 2021 from an estimated -5.8 per cent in 2020.
Its chief economist of ASEAN and South Asia, Edward Lee, said Malaysia’s economic recovery was partly driven by the continued operations of the economy, amidst targeted movement restrictions to contain the spread of COVID-19 and no global synchronised lockdown as for now.
“I do not have to stress the very clear and present risk — the COVID-19 resurgence and re-imposition of some restrictive measures we have seen in Malaysia,” he told reporters on the virtual 2021 Global Outlook media briefing today.
On Monday, Prime Minister Tan Sri Muhyiddin Yassin announced the enforcement of the Movement Control Order (MCO 2.0) in Penang, Selangor, the Federal Territories (Kuala Lumpur, Putrajaya and Labuan), Melaka, Johor and Sabah from Jan 13-26, 2021.
During the same period, conditional MCO (CMCO) is enforced in Pahang, Perak, Negeri Sembilan, Kedah, Terengganu and Kelantan, while Perlis and Sarawak is placed under the Recovery MCO (RMCO).
The following day, Yang di-Pertuan Agong Al-Sultan Abdullah Ri’ayatuddin Al-Mustafa Billah Shah proclaimed a nationwide state of emergency from Jan 12 until Aug 1, 2021, or until such time when the COVID-19 outbreak has come under control.
Lee said the imposition of MCO 2.0 would pose a downside risk to the economy, with the bank estimating that each month of nationwide MCO may subtract 1-1.5 percentage points from the 2021 GDP growth.
This is based on the assumption that the impact of MCO 2.0 is 50 per cent less than MCO 1.0, given the better ability to cope with the pandemic restrictions.
He added that Bank Negara Malaysia (BNM) is not expected to reduce the overnight policy rate (OPR) further amid rising risks due to the resurgence of COVID-19.
The central bank will convene its first out of six monetary policy meetings on Jan 20.
“The restriction is a lot more targeted either geographically or sector-wise, and also, we do not have a global synchronised lockdown.
“The promise of vaccine rollout is still there but does not really change the economic outlook. It just delays it and are probably temporary measures in that sense,” said Lee.
StanChart said BNM may continue to adopt a ‘wait and see’ stance.
In 2020, the central bank had cut the OPR by 125 basis points.