Kuala Lumpur: MIDF Research is maintaining its forecast for Malaysia’s Gross Domestic Product (GDP) performance at -4.8 per cent in 2020.
In a note Tuesday, the research house said the economy was set to continue improving, based on current developments and indicators.
“However, we expect it to be on a gradual term as the sentiments are still weak due to the resurgence of the Covid-19 cases in the country and also globally, with other downside risks emerging such as the political situation, rising protectionism and geopolitical tensions,” it said.
Domestically, the rise in Covid-19 cases had pushed most of the states into a Conditional Movement Control Order (CMCO), it added.
“While we view the current CMCO to be less stringent than what we had previously estimated and that most of the economic activities are allowed to continue operating according to the standard operating procedures, it will still have some impact on the strength of domestic demand due to physical movement restrictions.
“In other words, we recognise that the major impact of the CMCO on the economy is mainly from weaker consumer spending and its spillover effects on the services industry, particularly consumer-related sub-sectors such as retail trade, restaurants, hotels, travel, education, and recreation services,” it said.
MIDF Research said while international borders remain closed, the support coming from domestic tourism activities will be curtailed to some extent following the CMCO.
“Nevertheless, we believe the risk to consumption will be somehow cushioned by the growing online purchases facilitated by the availability of e-commerce platforms, home delivery services, and online financial services such as e-wallet and online banking. “In addition, stimulus packages announced on top of the cumulative 125 basis point cut in the overnight policy rate will continue providing support to the recovery,” it said.
The research house said while rising Covid-19 cases remained a major concern, the planned fiscal spending as outlined in Budget 2021 would provide more support to revitalise Malaysia’s economy from the negative effects of the global pandemic.
“Furthermore, further recovery in both domestic and external demand will be key factors for sustained recovery going into 2021,” it added.
