KUALA LUMPUR, Malaysia (July 2): The newly announced Enhanced Movement Control Order (EMCO) is unlikely to have a significant impact on Malaysia’s economy, according to RHB Bank Bhd. Dr Sailesh K Jha, group chief economist at RHB Bank, said at a press conference that the EMCO, which will be implemented in many districts across Selangor and Kuala Lumpur between July 3 and 16, would not have a significant impact on economic activity.
“These district-level tightening measures, in my opinion, are ineffective in the sense that they are difficult to police.” The manpower required to enforce these restrictions simply does not exist.
“I’m not concerned that there will be a significant disruption in economic activity.” You can still work if you have the required documentation (approvals). “It’s just more stringent,” Jha explained, “and the SOPs (standard operating procedures) will be lot more stringent.”
Despite Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz’s announcement that the government will revise the official economic growth prediction down from the current 6 percent to 7.5 percent range, the bank keeps its GDP growth forecast at 5.4 percent.
“It is exceedingly impossible to create a figure below 5% for Malaysia based on our figures,” he said, “which is why we are keeping our position of 5.4 percent GDP growth.”
In the short term, Jha anticipates the ringgit to trade between 4.15 and 4.20 against the US dollar, while he expects it to drop to 4.30 in the first quarter of next year, confirming his initial assessment of the currency.
He believes the dollar would continue strong, while the ringgit will drop as a result of numerous causes.
“Despite having a positive trade balance, we’ve seen some (US) dollar hoarding by corporations and other groups.” “Those (US) dollars haven’t been changed to ringgit for a variety of reasons,” he stated, without going further detail.
He said that the number of two-dose vaccines has been going upwards, from around 3% of the population in May to over 7% by the end of June, and that Malaysia should hit the 10% vaccination target in mid-July, one of the three conditions for exiting Phase 1 of the National Recovery Plan.
However, he stated that the relaxation of restrictions would be contingent on the other two conditions, namely the availability of hospitable beds across the country and new Covid-19 cases of less than 4,000 each day.
Aside from that, he believes emerging markets would be impacted by capital outflows in the second half of the year as the US Federal Reserve becomes more hawkish.
When asked if the weaker ringgit will benefit Malaysian exporters, Jha stated that might not be the case.
According to him, the data showed a decrease in semiconductor and electrical appliance production, which he explained might be attributable to input shortages or supply chain concerns rather than manufacturing line closures./n
