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Malaysia: MARC lowers 2021 GDP growth forecast to 3.9%
PETALING JAYA: Malaysian Rating Corp Bhd (MARC) has lowered its gross domestic product (GDP) growth forecast to 3.9% on-year, which is lower than its previous review of 5.1% due to the contraction in private consumption following the strict lockdown measures.
In its report yesterday, MARC said its earlier January 2021 GDP growth forecast for Malaysia was 6.4%. “Since then, back-to-back mobility restrictions have prompted us to shave off our earlier forecast to 3.9% year-on-year for 2021, which is even lower than the previous review of 5.1%.
“This implies that the economy will perform 2% below the pre-pandemic level this year. Moving forward, Malaysia’s growth outlook is solely dependent on how stringent mobility restrictions are, ” it said.
MARC said private consumption, the main driver of economic growth, will be hard hit in the near term due to the strict lockdown measures which include the closure of non-essential services.
“Spending by low-income households, which experienced higher job and income losses, will likely remain below pre-pandemic levels for a more extended period, especially when stimulus support expires, ” it said.
MARC said businesses have been grappling with persistent supply chain disruptions and falling domestic demand since the first movement control order (MCO 1.0).
The MCO 1.0 was enforced in mid-March last year. The rating agency pointed out the challenging business operating environment would push firms to delay or even cancel their investment decisions.
“Given the revenue shortfalls and rising expenditures to finance stimulus packages, the fiscal deficit will likely breach the current target set by the government of 6.0% of GDP in 2021. Instead, we anticipate the fiscal deficit to come in at 6.3% of GDP. We believe that more fiscal support could still be forthcoming.”
Source: https://www.thestar.com.my/business/business-news/2021/07/15/marc-lowers-2021-gdp-growth-forecast-to-39