News: Malaysia’s economy to contract in Q4 before recovering in 2021

Nov 17, 2020

CGS-CIMB Securities Sdn Bhd expects Malaysia’s economic growth to strongly recover next year, although it believes the second round of the conditional movement control order (CMCO) will keep the economy in contraction in the final quarter of 2020, reported Bernama.

Its positive projection for 2021 comes after Bank Negara Malaysia (BNM) revised its gross domestic product (GDP) forecast from between +5.5% and +8% to +6.5% and +7.5%, on the back of monetary and fiscal stimulus tailwinds.

The research firm noted that the recent BNM policy statement showed that Malaysia’s present monetary settings were adequately supportive even as the economy is forecasted to trail its pre-COVID-19 trend until next year.

We have the latest Malaysia Property Market Asking Price Performance report for Q4 2020. 

“We reiterate our end-2021 overnight policy rate (OPR) forecast of 1.75%, implying an extended hold in the benchmark interest rate,” said CGS-CIMB Securities as quoted by Bernama.

Maybank Investment Bank Bhd (Maybank IB), on the other hand, kept its annual real GDP forecast conservative at -5.4% for this year and +5.1% for 2021, saying that outlook will depend on the pandemic, policy and politics.

So far this year, the quarterly real GDP trend of Malaysia was in line with that of major emerging and other regional economies, said Maybank IB Chief Economist Suhaimi Ilias.

In fact, the -2.8% year-on-year implied GDP forecast for Q4 2020 indicated “speed bumps” in recovery process on the back of Covid-19’s third wave as well as the second round of CMCO.

The CMCO’s second round involves three federal territories and nine states which account for 84% of the country’s GDP.

“Our 2020 forecast implies Q4 2020 real GDP will shrink by -2.8% year-on-year although it will continue to expand by non-seasonally adjusted +2.6% quarter-on-quarter,” said Suhaimi as quoted by Bernama.

“The figure also assumes the economic impact of current CMCO is less severe than MCO, as BNM estimates that the GDP loss from current CMCO is between RM17 billion and RM22 billion, compared with RM30 billion and RM40 billion during MCO,” he added.

 

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Charis Lee
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CID REALTORS SDN BHD
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