Friday 29 Mar 2024
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KUALA LUMPUR (Jan 5): Malaysia's economic recovery is on track and does not need another shot in the arm, as the imminent roll-out of Covid-19 vaccines in the country is expected to hasten the process, according to Maybank Investment Bank (Maybank IB) chief economist Suhaimi Ilias.

"I think the stimulus that we have right now is sufficient, given the context of economic recovery as we should not overdo it and save our bullets for any potential downside," Suhaimi said today during a virtual media briefing on "Maybank Investment Bank's 2021 Malaysia Outlook".

He also pointed to the i-Sinar facility introduced by the Employees Provident Fund (EPF) as one of the largest stimulus packages available now, with the EPF reportedly having allocated RM70 billion to the initiative, which will allow an estimated eight million members to withdraw money from their Account 1 as advance to tide them over during this prolonged pandemic outbreak.

"In addition, we have seen the extension of the wage subsidy programme that has been extended into this year, which is more focused on helping industries, companies, workers, businesses that are most affected by the most recent round of surge of Covid-19 infections," he added.

The government launched its Prihatin Rakyat Economic Stimulus Package on April 1 last year, worth RM250 billion, to help its people tide over the devastating effects of the pandemic outbreak. Two months later, it announced the RM35 billion Short-Term Economic Recovery Plan or Penjana to kick-start the country's economic recovery.

Given the economic stimulus packages, Suhaimi said Malaysia's economy is recovering, tracking global development, with the country's year-on-year gross domestic product (GDP) contraction narrowing substantially to 2.7% in the third quarter of this year, from 17.1% in the second quarter.

For 2020, Suhaimi said Maybank IB is expecting the country's GDP to shrink by 5.4%, before rebounding to a positive growth of 5.1% in 2021.

Its estimation, however, is more conservative compared to the Finance Ministry's projection of a GDP contraction of 4.5% for 2020, followed by an expansion of between 6.5% and 7.5% in 2021. The treasury's GDP growth forecast for 2021 is also within the range of Bank Negara Malaysia's (BNM) 6.5% and 7.5%, but for 2020, BNM estimated a contraction of between 3.5% and 5.5%.

"I think the return to growth in 2021 would be broad-based, both on the supply side of the economy where all the sectors are expected to register an expansion, and the demand side, which will see consumer spending, investment and trade to accompany public consumption in terms of registering positive figures," he noted.

But political uncertainties, due to the government's weak majority in Parliament and the fragile Perikatan Nasional coalition — which may lead to a snap general election this year — are the wild cards Malaysia faces, he said.

On the ringgit front, he expects it to strengthen to around 3.90 against the greenback this year. At the time of writing, the ringgit had strengthened to 4.0162, from 4.44 in March last year.

Edited ByTan Choe Choe
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