KUALA LUMPUR (May 10): Malaysia’s gross domestic product (GDP) is likely to have grown by 0.5% quarter-on-quarter (q-o-q) in the first quarter of 2021 (1Q21), compared to the 0.3% contraction seen in 4Q20, said Moody’s Analytics.
It said although Malaysia contended with a severe resurgence in Covid-19 cases that peaked in February and tighter restrictions that dampened the revival of domestic consumption, the economy benefitted from a relatively strong trade position.
Exports were supported by recovering global demand for manufactured goods and bolstered by a surge in global demand for semiconductors.
“We expect gains from the pickup in external demand to have largely driven the March-quarter growth,” it said in a note today.
Bank Negara Malaysia (BNM) kept its benchmark policy rate unchanged at 1.75% in its May 2020 announcement — the lowest level in more than 10 years.
In March 2021, Malaysia’s industrial production rose by 9.3% year-on-year (y-o-y), while manufacturing output grew by 12.7% y-o-y and electricity rose by 10.3% y-o-y. Meanwhile, mining output contracted by 1.9% y-o-y.
“It is true that sizeable gains in exports over the March quarter more than likely offset the softness in domestic consumption as producers benefitted from recovering global demand for manufactured goods, while the net position was bolstered by global demand for semiconductors and recovering commodity prices.
“But this also reflects an incomplete and unsustainable revival,” it said.
Moody’s Analytics also noted that with substantial fiscal and monetary stimulus already provided since early 2020, policymakers are also running out of space for further accommodation.
“Delivering another rate cut amid the resurgence will not only gain limited traction in cushioning demand, but it runs a higher risk of triggering capital outflows, which emerging markets are susceptible to.
“This should be an additional risk that BNM will want to guard against,” it added.
BNM is scheduled to deliver tomorrow its Economic and Financial Developments in the First Quarter 2021 report.
