KUALA LUMPUR (July 2): RHB Bank Bhd does not expect the recently announced Enhanced Movement Control Order (EMCO) to have a significant impact on Malaysia’s economy.
Speaking at a briefing, RHB Bank’s group chief economist Dr Sailesh K Jha commented that economic activities would not be disrupted much by the EMCO, which will be imposed in several districts in Selangor and Kuala Lumpur between July 3 and 16.
“In my observations, these district-wise types of tightening measures are really not effective in the sense that it’s very difficult to police. The type of manpower that you need to enforce these measures is just not there.
“I’m not profoundly worried that we would have a massive disruption to economic activity. If you have the necessary papers (approvals) you can still work. It’s just more stringent and the SOPs (standard operating procedures) are going to be much more stringent,” said Jha.
The bank maintains its gross domestic product (GDP) growth forecast at 5.4%, despite Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz saying the government will be revising the official economic growth forecast down from the current 6% to 7.5% range.
“Based on our numbers, it is extremely difficult to generate a figure below 5% for Malaysia, which is why we are maintaining our view at 5.4% GDP growth,” he said.
Jha expects the ringgit to trade between 4.15 and 4.20 against the US dollar in the near term, although this could weaken to 4.30 in the first quarter of next year — maintaining his initial view on the currency.
He expects the greenback to remain strong, and the ringgit will see a weakening due to several factors.
“We have been seeing some (US) dollar hoarding by corporates and some other entities, despite having a decent trade balance. Those (US) dollars have not been converted to ringgit, and that’s due to a whole host of issues,” he said, without elaborating further.
He noted that the number of two-dose vaccinations has been trending upwards from around 3% of the population in May to over 7% as at end-June, adding that Malaysia could reach the 10% vaccination target — one of the three criteria for an exit from Phase 1 of the National Recovery Plan — in mid-July.
However, he said the loosening of restrictions will still depend on the other two criteria, namely the availability of hospitable beds nationwide and new Covid-19 cases of below 4,000 per day.
Besides that, he also sees emerging markets to be affected by capital outflows in the second half of the year amid a hawkish US Federal Reserve.
Asked if exporters in Malaysia would be able to benefit from the weaker ringgit, Jha said that might not be the case.
According to him, the data showed a decline in the production of semiconductor and electrical appliances, which he added may not be due to production lines being closed, but rather to shortages of input or supply chain issues.