KUALA LUMPUR (July 5): Nomura Research has slashed its 2021 gross domestic product (GDP) growth forecast for Malaysia to 4.4% from 5.6% after taking into account the impact of the lockdown and severe fiscal constraints.
Following a 5.6% contraction in 2020, the country’s GDP fell marginally by 0.5% in the first quarter of 2021 (1Q21), supported mainly by an improvement in domestic demand and export performance.
Nomura’s chief ASEAN economist Euben Paracuelles pointed out that the adverse impact of the lockdown is reflected by the roll-out of multiple stimulus packages.
“It also underscores that the government is facing very strong fiscal constraints. That’s why there are many non-fiscal measures, including the loan moratorium and allowing another withdrawal by members of the Employees Provident Fund (EPF).”
The government last week announced the RM150 billion National People's Well-Being and Economic Recovery Package (PEMULIH) to ease the financial burden of Malaysians. This came after the RM20 billion PEMERKASA and RM40 billion PEMERKASA+ packages unveiled in March and May respectively.
Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz told a media briefing that the government's official GDP forecast of between 6% and 7.5% this year will be revised downwards due to the current lockdown.
Tengku Zafrul said the ministry is still working on the figures.
The country's 2Q21 economic growth figures are expected to be released in mid-August.
Meanwhile, Paracuelles anticipates Bank Negara Malaysia (BNM) to cut the overnight policy rate (OPR) again to loosen its monetary policy further given that the latest enhanced movement control order (EMCO) in most parts of the Klang Valley will derail the economic recovery momentum.
He sees that the central bank will trim the OPR rate by 25 basis points (bps) to a fresh low of 1.5% at its Monetary Policy Committee meeting on Thursday.