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FLASH NEWS
Saturday, January 16, 2021

Economists lower forecasts for Malaysia’s 2021 development on Covid lockdown

A ladies is seen in Kuala Lumpur with a Malaysia flag as a background.

SOPA Photos | Getty

SINGAPORE — A number of economists slashed their 2021 development forecasts for Malaysia after the nation introduced stricter measures to include a current surge in Covid-19 instances.

The Malaysian authorities imposed an inter-state journey ban nationwide and a lockdown on six states and territories for 2 weeks beginning Wednesday. The nation’s king additionally declared a state of emergency that may final till Aug. 1, or earlier if Covid instances are successfully lowered.

Listed below are some economists who’ve lower their forecasts for Malaysia:

  • Capital Economics, a consultancy, mentioned the Southeast Asian nation will develop 7% this 12 months — down from its earlier projection of 10%;
  • Singaporean financial institution UOB downgraded its forecast from 6% to five%;
  • Japanese financial institution Mizuho lowered its projection from 6.7% to five.9%;
  • Fitch Options revised down its forecast from 11.5% to 10%.

Malaysia was one of many worst-performing economies in Asia final 12 months. The Worldwide Financial Fund in October mentioned the Malaysian economic system would shrink 6% in 2020, reversing a development of 4.3% within the earlier 12 months.    

Alex Holmes, Asia economist at Capital Economics, mentioned in a Tuesday report that Malaysia’s newest lockdown “is more likely to hit the economic system onerous.” He identified that the six states and territories underneath lockdown — which embrace capital metropolis Kuala Lumper and Malaysia’s richest state, Selangor — account for 57% of the inhabitants and 65% of gross home product.

The lockdown — regionally known as a motion management order, or MCO — consists of banning all social gatherings and dine-ins, closing colleges and permitting solely “important” companies to open.

Many of the remainder of the nation have been positioned underneath much less stringent measures, with most companies allowed to function however actions that contain giant gatherings are banned.

Economists from UOB mentioned in a Wednesday report that their development forecast downgrade assumed that the restrictions are prolonged for one more 4 weeks till end-February. However the general financial hit from the most recent measures is probably going “much less extreme” in comparison with final 12 months when the entire nation was locked down, added the economists.

‘Blessing in disguise’

The state of emergency declared on Tuesday rocked the nation’s shares and forex.

However the transfer will take away near-term political uncertainty that the nation has struggled with prior to now 12 months — and that might be “a blessing in disguise” for the Malaysian ringgit, mentioned Lavanya Venkateswaran, market economist at Mizuho.

The forex slipped 0.5% towards the U.S. greenback in a knee-jerk response to the state of emergency announcement on Tuesday, however has since strengthened towards the buck and greater than recouped these losses.

Malaysia’s Prime Minister Muhyiddin Yassin mentioned there will not be a curfew underneath the state of emergency, and the federal government and judiciary system will proceed to operate. However parliament will probably be suspended and elections can’t be held, he mentioned.

Muhyiddin got here to energy in March final 12 months and has been going through growing calls from inside his ruling coalition to step down and make means for a snap election.

The emergency declaration “removes pointless, and self-inflicted political uncertainty that might compromise the coverage response to COVID resurgence,” mentioned Venkateswaran wrote in a Tuesday report.

“As a substitute, a gradual coverage platform to decisively deal with (the) pandemic with urgency is finally a constructive for getting the economic system again on observe,” she mentioned.

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