BNM: Malaysia's 2021 GDP growth likely closer to lower range of 6% to 7.5% forecast if downside risks materialise

BNM: Malaysia's 2021 GDP growth likely closer to lower range of 6% to 7.5% forecast if downside risks materialise
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KUALA LUMPUR (March 31): Bank Negara Malaysia (BNM) said Malaysia’s economic growth is likely to be in the lower range of its 6% to 7.5% forecast for 2021, if downside risks materialise, mainly relating to ongoing uncertainties surrounding the Covid-19 pandemic as well as commodity shocks which can happen anytime.

During the media briefing, deputy governor Datuk Abdul Rasheed Ghaffour said the risk outlook remains on the downside, citing uncertainties due to Covid-19 and potential challenges that might affect the roll-out of vaccines both globally and domestically.

The pandemic aside, he said commodity supply shocks can happen “anytime and anywhere”, citing the blockage of the Suez Canal as an example.

“This can impact global trade. If this downside risk materialises, growth is likely to be closer to the lower bound of our forecast range,” he said.

On the other hand, he also highlighted some upside potential to growth as well, including the distribution and effectiveness of the vaccines which could lift sentiments and consumption spending, which in turn could accelerate the rollback of containment measures.

This would also lift income and promote a faster recovery in the high-touch sectors, such as tourism and services.

Meanwhile, BNM governor Datuk Nor Shamsiah Mohd Yunus said the Malaysian economy is expected to rebound from the second quarter of this year onwards and return to pre-pandemic levels by mid-2021.

She said a rebound in global growth in 2021 will drive a strong recovery in exports, particularly in electrical and electronic (E&E) products, on the back of a technology upcycle.

Besides that, she said private consumption will be supported by a gradual improvement in labour market conditions amid relaxation of containment measures, improving consumer sentiments from the vaccine roll-out and continued policy support that remains available particularly for vulnerable households.

Investment activity is also expected to pick up following the lifting of movement restrictions as well as favourable external demand conditions.

“We also anticipate progress in multi-year infrastructure projects, such as the ECRL (East Coast Rail Link), MRT2 (Mass Rapid Transit 2), LRT3 (Light Rail Transit 3) and the Pan Borneo Highway. We expect the positive growth momentum to be sustained into 2022, supported by further expansion in global growth,” she said.

Read more stories from the BNM Annual Report 2020 here.

Surin Murugiah