Thailand
Malaysia: Vaccine development to boost recovery
PETALING JAYA: Leading indicators show that Malaysia’s economy is still on the mend, but the pace of growth could be dragged down by the ongoing movement control order (MCO).
Malaysia’s Leading Index (LI) rose at a faster pace of 7.1% year-on-year (y-o-y) in November 2020 (October: 6.3% y-o-y), which pointed to a recovery in Malaysia’s economic activities particularly in the first half of 2020.
On a month-on-month (m-o-m) basis, the LI rebounded to 0.4% (October: -0.7% m-o-m), supported by increased real imports of semiconductors, particularly due to healthy demand for electronic integrated circuits.
There was also some improvement in the economic conditions, as reflected by the slower 2.3% y-o-y decrease in the Coincident Index (October: -2.4% y-o-y), driven by the higher real contributions to the Employees Provident Fund.
“We can expect to see some weakness in the LI, especially in the first quarter of the year with the imposition of the MCO 2.0 in almost all states in January-February to contain the resurging Covid-19 infections.
“However, the development of vaccines will boost economic sentiment, which helps the recovery in the economic growth going forward.
“Thus far, looking at the trend in the LI, we can anticipate the economy continuing to recover in 2021, although the pace of growth could be dragged down by the MCO 2.0 restrictions, ” MIDF Research said in a report yesterday.
MIDF also pointed out that while exports fell in 2020, they were not significantly worse than in 2019.
Malaysia’s exports declined 1.4% y-o-y in 2020 (2019: -1% y-o-y), softer than MIDF’s forecast of 2.5% y-o-y.
Similarly, imports recorded a decline of 6.3% y-o-y (2019: -3.3% y-o-y), which was not far from its estimate of 6.8% y-o-y.
“Malaysia’s external trade had already been pressured before the Covid-19 pandemic, particularly due to the spillover effects of the US-China trade war which escalated in 2019.
Covid-19 had somewhat disrupted global trade flows, especially in the first-half of 2020, as many key countries shut down their economic activities on the fear of the pandemic.
“However, the fall was mitigated in the second-half as countries gradually resumed economic activities, increasing trade flows.
“Malaysia also benefitted from the fast recovery in China’s economy, which increased demand for our products such as electrical and electronic goods, ” it added.
On the labour market front, Malaysia’s unemployment rate rose to 4.8% in November last year (Oct-20: 4.7%), the second successive month of increase.
“We expect the figure to remain unchanged at 4.7%, but the official figure suggests a recovery in the labour market weakened during the month.
“The third wave of the pandemic continued to plague economic activities, as the implementation of the targeted conditional MCO had been extended and widened to other states and also restricted inter-district travels, ” MIDF noted.
It added that Bank Negara expects the economy to pick up from the second quarter of 2021 onward when the current restrictions from the imposition of MCO 2.0 will be eased.
“In other words, the recent tightening of restrictions is a temporary challenge to the economy, particularly in the early part of 2021.
“Overall, the ongoing pandemic remains a key downside risk to the growth outlook, as growth for Malaysia and the global economy could be dragged down by a potential resurgence of Covid-19 infections and the possibility of a slower rollout of Covid-19 vaccines, ” it said.
Source: https://www.thestar.com.my/business/business-news/2021/02/03/vaccine-development-to-boost-recovery