Kuala Lumpur: Malaysia’s economy remains on track towards recovery as domestic economic activities improve and exports increase, said MIDF Amanah Investment Bank Bhd (MIDF Research).
The research house said its assessment was based on the latest Leading Index (LI), which registered the fourth consecutive month of positive growth in August – an annual growth of 7.6 per cent, the same as in the previous month – supported by improving confidence and sustained expectation in future sales.
The LI is a predictive tool used to anticipate upturns and downturns in the economy.
MIDF Research said the sustained increase in LI suggested that the recent recovery would continue in the months to come.
“We expect Malaysia’s economic growth will begin to recover and improve in the third quarter (Q3) of 2020 onwards after the sharp contraction in the second quarter.
“In particular, the aggressive monetary policy easing and fiscal stimulus packages provided by the government helped to stimulate the economy and cushion the impact of economic fallout from the ongoing Covid-19 pandemic,” it said in a note Friday.
Based on the recent data released, MIDF Research said there had been more signs of continued recovery in domestic consumption and in exports, which rose due generally to the reopening of economies both locally and abroad that allowed for demand to pick up.
The research firm has maintained its Gross Domestic Product growth forecast at -4.8 per cent for 2020, with growing downside risk particularly on domestic consumption outlook given the targeted Movement Control Order (MCO) imposed in certain states and localities.
It said the targeted restrictions that had been imposed to contain the recent Covid-19 resurgence might have a significant negative impact on the economy.
For now, as economic activities are generally allowed to operate, MIDF foresees the impact to be relatively smaller than the MCO imposed earlier this year.
“If the Covid-19 infectivity curve can be flattened without having businesses to shut down their operations temporarily, we envisage that this targeted lockdown will be a better approach in our fight with the ongoing Covid-19 pandemic.
“Such an approach will limit the impact on business activities from a sharp fall in demand and possible supply chain disruption, and therefore result in minimal losses to the overall economy,” it said.
MIDF Research, however, said if the new cases of infection remained elevated, the restrictions could be extended for a longer period and be further tightened, which would have a more significant negative impact on economic growth, especially in the current quarter.
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