Bright Hope for the Malaysian Economy! - Kakiforex.com - Financial Market Media No. 1 in the World Bright Hope for the Malaysian Economy! Bright Hope for the Malaysian Economy!

May 7, 2021

Bright Hope for the Malaysian Economy!

 The country's economic growth is projected to pick up again in the second half of this year following the impact of the expansion of fiscal and monetary strategies.


According to Public Investment Bank Bhd, the overall sentiment will be driven by vigorous vaccination efforts and enable the country to achieve the group immunity target by the end of this year.


"Such efforts could spur recovery in sensitive sectors such as tourism and services as well as generate continued production for key sectors such as manufacturing, construction and agriculture following the decision to allow operations to be maintained," the firm said in a research note today.


According to the investment bank, as reported by Bernama, the six Covid-19 fiscal stimulus programs introduced by the government with a value of more than 20% of Gross Domestic Product (GDP) or RM340 billion, will also drive a significant increase in output, thus potentially driving the economy. to pre -crisis levels.


Public Bank Investment added that economic growth will also be supported by an accommodative interest rate environment as the recovery in inflation is driven by more cost -driving factors, especially oil.


Yesterday, Bank Negara Malaysia (BNM) through the Monetary Policy Committee (MPC) maintained the Overnight Policy Rate (OPR) at 1.75%, a decision in line with bank and market expectations.


The OPR has also been left stable since September last year driven by factors such as the six Covid-19 fiscal stimulus packages which were fully implemented this year and are expected to buy a spillover of positive impact on the economy.


According to Public Investment Bank, another driver of growth is likely to be the creation of at least 500,000 jobs through private-public initiatives that can boost revenue as well as spending.


"The central bank's data -driven strategy following the impact of the spending stimulus and the accommodative interest rate environment, is expected to see the OPR remain stable in the first half of this year," he said.


However, the investment bank warned that the downside risk was likely due to the challenge of vaccination efforts as only about 30% of the people had received the vaccine so far.



"In addition, the upcoming US-China trade talks are also among the concerns as they involve a longer period following the postponement," he explained.


Meanwhile, AmBank Research said the OPR is expected to remain at current levels throughout 2021 although there is a 10-20% possibility for an upward revision involving 25 basis points in the second half of this year.


“Currently, there is no urgent need for BNM to change the existing rate. Economic indicators also show the momentum of improving economic performance, ”he said.


According to him, although inflation is expected to increase in the second quarter of 2021 but will return to stability in the period after that.


“This increase is mainly contributed by the cost aspect. Inflation is projected at around 3.0% -3.5% with GDP for 2021 expected at around 6.0% with a decrease of 5.0% and an increase of 7.0%, ”he said.


Meanwhile, Moody's Analytics said that despite the implementation of the vaccination program, there was still a declining risk following the threat of a new Covid-19 transmission and the re-implementation of wider movement restrictions that could affect the country's economic recovery efforts.


"Refusal to receive the vaccine if not handled properly, can affect the confidence and immunity of the targeted group," he explained in a research note.


In fact, he said, the recent surge in US Treasury revenue has also had a double impact on the economies of emerging countries, including Malaysia.


According to him, the increase in bond yields could trigger massive sales in emerging markets as well as affect Malaysia's financial stability.


"Due to these factors, the space for monetary policy changes is limited. BNM needs to take into account the risks of financial instability as well as an unsustainable economic recovery.


"Therefore, the central bank is expected to maintain its accommodative stance until the end of this year and at the same time may move to other targeted approaches to boost the economy," he said.