KUALA LUMPUR – After an eventful 2020 which pushes the global economy towards recession, including Malaysia, the after-effects are expected to be shallow this year as the economy makes a come back, as reported on Bernama.
Maybank Investment Bank Bhd (Maybank IB) chief economist Suhaimi Ilias said that Malaysia was expected to record a gross domestic product (GDP) growth of 5.1% this year compared with an estimated contraction of 5.4% in 2020.
“However, the third wave of COVID-19 which has caused a spike in cases will continue to be a downside factor especially in terms of the reopening of the borders. We have seen the plans by Singapore and Hong Kong to open their travel bubble have been suspended due to this,” he said in a media briefing on January 5.
On the employment front, he said it would remain volatile even though some people have returned to the workforce.
“However, our concern is about under-employment which will be an issue in the labour market,” he said.
Meanwhile, he said the ringgit would reach towards the 3.90 to the US dollar level ahead of a softer US market outlook as well as some other wildcards including US-China trade tension.
As for crude palm oil (CPO), he said the price would be around RM2,500 per tonne on average, while the global benchmark Brent crude oil was expected to trade at US$45.50 per barrel.
In terms of attracting foreign direct investments (FDI) into the country, Suhaimi said this would depend on several factors such as the cost of doing business , political stability and policy overhang.
“We need to have a clear policy on investment incentive. With the 12th Malaysia Plan being delayed to March, investors would adopt a wait-and-see attitude while awaiting more clarity in terms of policy. As we see it, Budget 2021 has incentives for high value FDI,” he said.
On equities, Maybank Kim Eng Head of Regional Equity Research Anand Pathmakanthan said the company had projected the main index, FTSE Bursa Malaysia KLCI (FBM KLCI) to hit 1,830 by end-2021.
“2021 is looking quite good as we see sharp recovery of about 45% in earnings growth year-on-year from a contraction of 11% in 2020.
“It will be supported by specific sectors that will continue to do quite well, namely glove and the recovery in certain sectors such as gaming, financial, plantation, and oil and gas that are pricing on the upside with higher recovery in CPO and oil prices,” he said.
Despite the cancellation of the Kuala Lumpur-Singapore High Speed Rail project, Anand said prospects remained solid as there were other mega projects such as Light Rail Transit 3, Mass Rapid Transit and Penang Transport Masterplan that would proceed as planned.
“The government’s fiscal stimulus will stimulate the economy to reach its GDP growth target in 2021. The stimulus package will help earnings outlook for the economy as a whole and more specifically sectors such as construction,” he added.