Malaysian economy to recover in 2021 on effective vaccine deployment — World Bank

(Photo by Mohd Suhaimi Mohamed Yusuf/The Edge)

(Photo by Mohd Suhaimi Mohamed Yusuf/The Edge)

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KUALA LUMPUR (Feb 22): Malaysia’s economy is expected to return to positive growth this year, along with other economies globally on sustained progress in vaccine roll-outs that will boost consumption worldwide, the World Bank Group said.

Its macroeconomics, trade and investment global practice lead economist Richard Record said the group expects the vaccine deployment can be mostly completed in 2021 in most economies, leading to strong recovery and demand, as well as boosting trade and commodity prices.

“We are projecting a global growth of 4% this year. As for Malaysia, we project economic growth this year to range between 5.6% and 6.7%,” he said during the virtual 2021 Malaysia’s Economic and Strategic Outlook Forum (MESOF) titled “The Post-COVID-19 New Normal — Where Do We Go From Here” today.

The MESOF is organised by KSI Strategic Institute for Asia Pacific and co-organised by the Malaysian International Chambers Of Commerce & Industry and Economic Club of Kuala Lumpur.

Record noted that China is among the reasons of growth recorded by the Asian economies, with Malaysia included.

However, he cautioned downside risks to growth include slow progress of vaccine deployment and new containment that could lead to another movement control order (MCO), adding that consumption is the largest part of the Malaysian economy.

“Risks to the growth outlook include an unexpected delay in the vaccine roll-out, ineffective containment, an elevated number of vulnerable households and domestic political uncertainties.

“In the near term, policies should focus on containing the outbreak and protecting the most vulnerable and on rebuilding fiscal buffers as economic conditions improve,” he added.

Another panellist, Shan Saeed, the chief economist of Juwai IQI Global, said the Malaysian government continues to maintain macroeconomic stability, which is moving faster and had surprised market participants.

“The government is in total control of the economy and will continue to support [it] when required. Amalgamation of fiscal and monetary policy levers hold the key for economic growth and Bank Negara Malaysia (BNM) has lot of room to manoeuvre in the monetary landscape,” he opined.

Shan noted that the central bank would use tactical and strategic moves to maintain structural stability of the local currency.

Echoing Record, Shan expects the Malaysian economy to follow China’s dual-circulation strategy to support local businesses and encourage aggregated demand at the macro level.

Sharing some of his key statistics, he said the Brent crude oil is expected to trade between US$50 (RM202) and US$70 per barrel, which could help support the ringgit trading at 3.67 to 4.10 per US dollar.

On gross domestic product (GDP), he is a bit modest, seeing the number to hover between 3% and 4%, while the central bank is expected to keep the overnight policy rate at 1% to 1.75% in 2021.

Meanwhile, Department of Statistics Malaysia (DOSM) chief statistician Datuk Seri Dr Mohd Uzir Mahidin said the Malaysian Economic Outlook 2021 forecasts the country's external trade to grow by 3.9%, with exports of goods expected to increase by 2.7% as a result of the recovery in global trade and supply chains, while imports are expected to rise by 5.3%, contributed by an improvement in all types of imports.

“Inflation is likely to make a comeback in 2021 after a deflationary trend this year as the Covid-19 pandemic suppresses demand for goods and services.

“This is thanks to the early roll-out of a safe and effective Covid-19 vaccine and unleashing of pent-up demand in conjunction with supply shortages, which could result in an inflation comeback,” he said.

Quoting the Ministry of Finance (MoF), Mohd Uzir said inflation is projected at 2.5% versus -1.13% in 2020, signalling a stronger surge in consumer spending.