Thailand
Malaysia’s Q1, Q2 growth may take only muted hit from movement curbs, say economists
MALAYSIA’S first-quarter growth may not have been hit that hard by reimposed movement curbs at the start of the year, and the latest restrictions look to be relatively forgiving as well, said economists this week.
Barclays economist Brian Tan said: “Our Q1 estimate suggests the economic recovery continued despite the imposition of the so-called Movement Control Order (MCO) 2.0.” His estimate is for Q1 GDP to rise 0.4 per cent year on year, or 2 per cent on a quarter-on-quarter, seasonally adjusted basis.
He noted that MCO 2.0 is “notably less stringent” than the first MCO imposed from March to April last year, which caused a very favourable base effect for this March.
“This is in line with high-frequency indicators showing a relatively smaller drop in community mobility under MCO 2.0 compared with last year’s MCO,” said Mr Tan.
Similarly, Citi economists Kit Wei Zheng and Ang Kai Wei noted that among various incoming data on Q1, wholesale and retail trade edged up in the first two months by 0.4 per cent from the fourth quarter, “despite reduced mobility” due to the MCO. Along with other indicators, this suggests that Q1 could see a sequential expansion, they said.
The strength of the rebound in the second quarter could be moderated by the reimposition of containment measures, they noted.
Yet these more targeted measures “should be less economically damaging”, they added. Malaysia is extending the MCO to Johor, Kuala Lumpur, 14 sub-districts in Terengganu, and one sub-district in Perak from May 7 to 20. This follows the earlier reimposition of the MCO in Kelantan and six districts in Selangor, in place till May 17.
The Citi economists said: “In our view, the latest restrictions underscore the government’s intention to impose MCO in a targeted manner, to reduce the impact on economic activity, and given reduced policy ammunition, especially on the fiscal front.”
“Even with MCO 3.0, we expect drags to be less pronounced than in Q2 2020, as measures are more targeted and consumers have adapted via e-commerce.”
Mr Tan said he expects the latest MCO to be “relatively lenient”, noting that most workplaces have been allowed to remain open. Barclays is keeping its full-year GDP forecast at 5.5 per cent.
Source: https://www.businesstimes.com.sg/asean-business/malaysias-q1-q2-growth-may-take-only-muted-hit-from-movement-curbs-say-economists