MIDF Research revises 2021 GDP outlook downward to 5.4pct

KUALA LUMPUR (February 11) : MIDF Research has revised downward its projected gross domestic product (GDP) for Malaysia to 5.4 per cent this year from 7.0 per cent previously.

The firm still sees the economy growing in 2021 to reverse the 5.6 per cent contraction last year, in line with the resumption in domestic and global economic activities as well as because of the low base factor in 2020.

However, MIDF Research said the economic performance in the first quarter (Q1) of 2021 would likely be throttled down by the current Movement Control Order (MCO) and renewed restrictions in key countries due to surging Covid-19 cases which had limited mobility and slowed demand.

"In addition, we foresee a temporary setback to the labour market recovery as some businesses may hold hiring due to the lower business activities during the MCO 2.0 period which will affect income prospects," it said in its commentary of the 2020 GDP announced by Bank Negara Malaysia today.

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MIDF Research said by factoring in the restrictions in Q1 2021 in particular, it had revised its full-year GDP growth forecast downward, suggesting the economy to attain a more gradual normalisation.

"Nevertheless, we believe the impact will be much lesser than what we experienced in the first MCO given the less restrictive measures currently. Most of the businesses are allowed to operate while impact to 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 2Q21 onwards," it said.

MIDF Research said in addition, solid growth expectation for Malaysia's key trading partners such as China and the US would assist the country's economic recovery via higher exports demand.

"Downside risks to the estimate include hiccups in National Vaccination Plan, political situation, price volatility in commodity prices, protectionism and geopolitical tensions," it added.

Source:

https://www.nst.com.my/business/2021/02/665085/midf-research-revises-2021-gdp-outlook-downward-54pct