HSBC Group Lowers Malaysia’s GDP Forecast To 5.7%

HSBC Group has lowered their forecast of Malaysia’s Gross Domestic Product (GDP) growth to 5.7 percent, down from 6.7 percent earlier this year. 

HSBC Chief Economist Joseph Incalcaterra said that the outbreak at the start of the year did have an impact on the optimistic growth forecast.

“As the result, we had to reduce Malaysia’s GDP forecast to 5.7 percent this year, which is marginally lower than the government’s estimate and as the economic projection for this year has been reduced due to the reinstatement of the Movement Control Order (MCO) in January in an effort to control the third wave of the Covid-19 outbreak,” Joseph stated during a virtual media briefing

According to the previous statement from Bank Negara Malaysia (BNM), they expect the Malaysian economy to rebound to pre-Covid levels by mid-2021, with GDP forecast witness a hike by 6-7.5 percent this year, compared to a 5.6 percent contraction in 2020 due to the effects of the Covid-19 outbreak.

In the meantime,  Joseph remains optimistic about Malaysia’s economic recovery prospects this year, citing good export data, foreign direct investment commitments, and a vaccination strategy.

He added that they think the key focus is the momentum of growth to rebound in the second quarter (2Q) given that the MCOs have ended so we should see a strong momentum for the quarter.

“What the investors will focus on is the high likelihood of an election, it’s always something to be on the backdrop of investors, and particularly bond investors will be focusing on the fiscal consolidation trajectory in the future government would increase the revenue base and restore the debt GDP trend back to 55%,” he concluded.

According to BNM’s Economic and Monetary Review 2020, the key factors supporting growth recovery is improving external demand amid a technology upcycle, less stringent containment measures and the Covid-19 vaccine roll-out, a gradual improvement in labour market conditions as well as a pickup in production from new and existing manufacturing and mining facilities.

The central bank also highlighted that comprehensive and complementary policy support had been and will remain central in supporting the economy.

Malaysia’s real Gross Domestic Product (GDP) growth for 2021 is now expected to be just 5.7 percent, down from 6.7 percent earlier this year, according to the HSBC Group.

HSBC Chief Economist Joseph Incalcaterra mentions that the outbreak at the start of the year did have an impact on the optimistic growth forecast.

“As the result, we had to reduce Malaysia’s GDP forecast to 5.7 percent this year, which is marginally lower than the government’s estimate and as the economic projection for this year has been reduced due to the reinstatement of the Movement Control Order (MCO) in January in an effort to control the third wave of the Covid-19 outbreak,” Joseph stated during a virtual media briefing

According to previous statement from Bank Negara Malaysia (BNM), they expect the Malaysian economy to rebound to pre-Covid levels by mid-2021, with GDP forecast witness a hike by 6-7.5 percent this year, compared to a 5.6 percent contraction in 2020 due to the effects of the Covid-19 outbreak.

In the meantime, Joseph remains optimistic about Malaysia’s economic recovery prospects this year, citing good export data, foreign direct investment commitments, and a vaccination strategy.

He added that they think the key focus is the momentum of growth to rebound in the second quarter (2Q) given that the MCOs have ended so we should see a strong momentum for the quarter.

“What the investors will focus on is the high likelihood of an election, it’s always something to be on the backdrop of investors, and particularly bond investors will be focusing on the fiscal consolidation trajectory in the future government would increase the revenue base and restore the debt GDP trend back to 55percent,” he concluded.

According to BNM’s Economic and Monetary Review 2020, the key factors supporting growth recovery are improving external demand amid a technology upcycle, less stringent containment measures and the Covid-19 vaccine roll-out, a gradual improvement in labour market conditions as well as a pickup in production from new and existing manufacturing and mining facilities.

The central bank also highlighted that a comprehensive and complementary policy support had been and will remain central in supporting the economy.

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