CGS-CIMB has maintained Malaysia’s 2022F GDP growth forecast at 5.6%, with the expectation that BNM will hike OPR twice in 2022F at+25bp each. It has put 1Q22 growth at 5.1% YOY.
It said that for the monetary policy, it sees the dismal 4Q21 as temporary and will not affect the private consumption trajectory seen so far.
Reviewing the 4Q21 economic performance, the research house said that Malaysia’s real GDP expanded 3.6% yoy in 4Q21, undershooting our expectation of +4.1% YoY, but higher than Bloomberg median consensus of +3.3% yoy.
“For the full year, the rebound was 3.1%, insufficient to make up for the 5.6% contraction in 2020. It said that as a result, Malaysia’s economy was still 2.7% smaller compared with its pre-pandemic level in 2019,” it said.
The research house said that the 4Q21 underperformance relative to our forecast came primarily from the agriculture sector as the actual palm oil production was weaker than our projection in our GDP preview report. On the plus side, we got the estimates for manufacturing and services sectors almost like the actual data.
On private consumption, RHB said that private consumption recovery was unsatisfactory, given that household spending contracted 3.5% YoY in 4Q20, the 3.7% YOY rebound in 4Q21 was not really impressive amid the rollback of restrictions on interstate travel and retail operating capacities.
It said that monthly GDP data showed Dec as the problem month, as the economic improvement seemed to have been disrupted by floods in eight states. A special report released by the Department of Statistics on the impact of the floods showed a total loss of RM6.1bn (0.4% of GDP).
“ If this is true, then 1Q22F GDP might not be so bleak after all, as the loss could be offset by post-disaster reconstruction as well as the resumption of the overall pent-up demand,” it said.
It said that in addition, the provision of subsidies on staple food and fuel by the government in 1Q21 should mitigate the rising inflationary pressure and keep consumption growth uninterrupted. One risk, however, is the rising number of Omicron cases, though this poses little downside for us so far.
