Malaysia: Q1 GDP could contract less than expected – UOB

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting comment on the upcoming Q1 GDP release in the Malaysian economy.

Key Quotes

“The latest economic data in Jan-Mar suggests that Malaysia’s economy may surprise with a narrower decline of 0.5% y/y in 1Q21 (4Q20: -3.4% y/y), despite the reintroduction of Movement Control Order (MCO 2.0) between 13 Jan and 4 Mar.”

“The expectation of a smaller GDP drop is due to a robust recovery in manufacturing and external trade activities, while selected service segments were lifted by higher digital adoption, policy support, and release of pent-up demand. However, the closure of international borders and interstate travel ban continues to take a toll on tourism-related sectors particularly accommodation, food & beverage, and transport & storage.”

“The latest tightening of measures (under MCO 3.0) and lingering uncertainties are expected to weigh on the economy in the near term but not derail the recovery. We reiterate our full-year GDP forecast of 5.0% in 2021 (2020: -5.6%). The impact of MCO 3.0 is expected to be less severe with most key economic sectors allowed to operate and measures in place to mitigate negative effects. Meanwhile the domestic vaccination program is expected to accelerate from mid-year onwards as more vaccines arrive, helping to lift sentiment and underpin the recovery.”