KUALA LUMPUR – The Malaysian economy is expected to be buoyed by external demand, particularly exports of electronic products to China and Singapore, amidst the global shortage of semiconductors, said Moody’s Investors Service, reported Bernama.
In a note on March 5, Moody’s said the oil and gas industry is also expected to rebound after last year’s record low prices, providing a boost to the country as a net exporter of oil.
“However, uneven roll-outs of vaccines domestically and in the region will temper growth prospects and delay the rebound in the tourism industry. The unemployment rate also remains relatively high at almost 5%, compared with the average 3% over the last five years,” it added.
Moody’s said inflation is expected to pick up this year, mainly thanks to higher oil prices, but noted that the central bank still maintains the policy space to hold rates low into 2022.
On Bank Negara Malaysia’s decision to maintain the 1.75% overnight policy rate during its Monetary Policy Committee meeting on March 4, citing the roll-out of vaccines globally as well as ongoing fiscal support, Moody’s said the decision was an expected outcome from the meeting.
It said although the domestic containment measure in the first quarter of 2021 (1Q21) will dampen economic growth, the strict Movement Control Order (MCO) has since been lifted across all states, and consumer spending is expected to pick up, moving forward.
The number of daily new Covid-19 infections has also been falling from its peak of almost 6,000 in January to about 2,000 currently.
“External demand for electronics, as well as recovering oil prices, will also bolster the outlook. Downside risks, however, remain from uneven vaccine roll-outs domestically and overseas, as well as volatility in commodity prices,” it added.
Malaysia announced that it will be lifting the MCO in Kuala Lumpur, Selangor, Johor, and Penang starting from today, effectively placing most of the country under the less stringent Conditional Movement Control Order.
Moody’s said altogether, the four states make up almost 60% of the country’s economic activity, and easing restrictions will likely buoy consumer spending and boost growth in 2Q21.
“Travel between districts will now be allowed, and more businesses will be permitted to resume operations. However, interstate travel is still banned, which will curb movement in the economically important Klang Valley, which spans Kuala Lumpur and Selangor,” it noted.