KUALA LUMPUR, Malaysia (July 5): After accounting for the impact of the lockdown and severe fiscal constraints, Nomura Research has lowered its 2021 GDP growth forecast for Malaysia to 4.4 percent from 5.6 percent. Following a 5.6 percent contraction in 2020, the country’s GDP shrank by 0.5 percent in the first quarter of 2021 (1Q21), owing to improved domestic demand and export performance.
The adverse impact of the lockdown is reflected in the roll-out of multiple stimulus packages, according to Nomura’s chief ASEAN economist Euben Paracuelles.
“It also emphasizes that the government is under severe financial constraints. As a result, many non-fiscal measures have been implemented, such as a loan moratorium and allowing members of the Employees Provident Fund (EPF) to withdraw their funds again.”
Last week, the government launched the RM150 billion National People’s Well-Being and Economic Recovery Package (PEMULIH) to help Malaysians get out of debt. This followed the announcements in March and May of the RM20 billion PEMERKASA and RM40 billion PEMERKASA+ packages.
The government’s official GDP forecast of between 6% and 7.5 percent this year will be revised downwards due to the current lockdown, according to Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz.
The figures are still being worked on, according to Tengku Zafrul.
In mid-August, the country’s 2Q21 economic growth figures are expected to be released.
In the meanwhile, Paracuelles expects Bank Negara Malaysia (BNM) to decrease the overnight policy rate (OPR) again to soften its monetary policy even further, given that the current enhanced movement control order (EMCO) in most parts of the Klang Valley will stymie the economic recovery.
At the Monetary Policy Committee meeting on Thursday, he expects the central bank to cut the OPR rate by 25 basis points (bps) to a new low of 1.5 percent.
Nomura expects BNM to cut OPR this week as a tighter lockdown stalls recovery./n
