CGS-CIMB Research expects OPR to be cut by 25bps on March 3

CGS-CIMB Equities Research expects Bank Negara Malaysia’s monetary policy committee to ease monetary conditions to support economic growth, with a 25bp Overnight Policy Rate (OPR) cut on March 3.

KUALA LUMPUR: CGS-CIMB Equities Research expects Bank Negara Malaysia’s monetary policy committee to ease monetary conditions to support economic growth, with a 25bp Overnight Policy Rate (OPR) cut on March 3.

It said on Friday the economic outlook has been significantly affected by the Covid-19, supply-side shocks and renewed domestic political uncertainty.

The RM20bil stimulus package, constrained by the magnitude of external shocks on the one hand and fiscal prudence on the other, is unlikely to prevent a sharp front-loaded slowdown in growth.

“Self-healing is dependent on the timeline of Covid-19 containment, but we expect a swift recovery once travel restrictions are lifted and consumption habits normalise.

“Having factored in the impact of the aforementioned risks and the stimulus package, we downgrade our 2020 GDP growth projections from 4.4% to 3.6%, which lies within the government’s revised forecast range of 3.2-4.2% (vs. 4.8% previously), ” it said.

On Thursday, interim Prime Minister Tun Dr Mahathir Mohamad announced an economic stimulus package worth RM20bil aimed at mitigating the impact of Covid-19, arresting the slide in economic growth and boosting investments.

Fiscal impulse from direct government spending is small, accounting for RM3.5bn, with the majority of the stimulus coming from non-fiscal measures.

Hence, the government estimates that the stimulus package will raise the budget deficit target from 3.2% of GDP to 3.4% of GDP in 2020, CGS-CIMB Research said.