StanChart Global Research cuts Malaysia GDP growth to 2.5%

“We therefore see a more prolonged hit to both local and external demand in Malaysia even as supply chain disruptions in China normalise, ” StanChart Global Research said.

KUALA LUMPUR: Standard Chartered Global Research has reduced Malaysia’s economic growth forecast for this year to 2.5% from 4.2% to reflect a greater hit to local and external demand from a more protracted outbreak from Covid-19.

The research house said its previous projections were based on a sharp – but brief – supply-chain disruption due to China’s restrictive coronavirus containment measures and the resulting temporary impact on local and external demand; for example, through reduced tourism.

“However, we raise our 2021 GDP growth forecast to 4.8% from 4.4% previously on a favourable base effect.

“While we believe that supply chain disruptions in China should end with the return of the country’s productive capacity, the demand hit from the coronavirus outbreak has now become broader, deeper and more protracted than we earlier envisaged, ” it said.

The research house said its initial working assumption was a sharp hit to economic activity (mainly in Asia) in 2Q, with a lingering negative impact in 2Q, before a normalisation in the second half.

Since then, the outbreak has spread rapidly across the world, with different countries affected at different points in time.

“Governments around the world, including Malaysia’s, are progressively introducing containment measures that are necessary but likely to be negative for growth short-term.

“We therefore see a more prolonged hit to both local and external demand in Malaysia even as supply chain disruptions in China normalise, ” StanChart Global Research said.