PETALING JAYA: The Malaysian Rating Corp Bhd (MARC) is projecting real gross domestic product (GDP) growth to pick up to 6.2-6.7% on account of the low base in 2020, as well as some recovery in private consumption and improvements in the external sector.
It said while private consumption will moderate significantly in 2020, some normalisation could emerge especially when the Covid-19 pandemic starts to subside.
“On the external front, the WTO is anticipating global merchandise trade volume growth to pick up by between 21% and 24% in 2021, after shrinking by between 13% and 32% in 2020.
“Given this possibility, we foresee the improvement in global trade to push up Brent crude oil prices to an average of US$45-50 per barrel in 2021. This will partly provide a boost to Malaysia’s real GDP growth and the government coffers in 2021.”
That said, MARC pointed out that the wild card remains the duration of the Covid-19 pandemic globally, and as such, its expectation of a pickup in GDP growth in 2021 does not suggest that Malaysia’s potential output, will emerge from the crisis unscathed.
Meanwhile, for the nearer term, a contraction in real GDP is expected, since the pace of private consumption will be impacted by a weaker labour market following a sharp increase in the number of unemployed.
“Given the decline in consumers’ purchasing power following a higher jobless rate, consumer spending growth will likely moderate significantly in 2Q’20.”
“Both public and private investments which contracted by 11.3% and 2.3% in 1Q’20 will likely continue to drag the economy as global and domestic business sentiment remains fragile,” it said.
The outlook for the rest of the year also hinges on external factors such as trade statistics, a decline in semiconductor sales and a sharp drop in the major commodity prices of crude oil and palm oil.
“Against this backdrop, we foresee Malaysia’s real GDP to contract by 1.5% to 3% in 2020. Our latest projection takes into account the better-than-expected performance in 1Q’20, and the likelihood of a slight rebound in global crude oil prices in 2H’20.
