MCO 2.0 less severe on economy, says AmBank Research

Rela personnel checking the temperatures of market goers at the entry point of Jalan Penaga which was closed to motorists near Jelutong wet Market during MCO 2.0. -ZAINUDIN AHAD/The Star 17 Jan 2021

KUALA LUMPUR: The second round of the movement control order or MCO 2.0 is expected to be less hard hitting on the economy as compared to the impact which the first MCO had when enforced in March last year.

AmBank Research said on Monday while some dent could be expected in the immediate term, it was unlikely for the economy to report an extremely slower growth in 2021.

Assuming the overall economic capacity of around 50% to 60% in the 1Q 2021 and an improvement to between 70% and 80% in 2Q with gradual easing of restrictions and that the economy operates as usual in the second half, it projected a reduction in domestic gross domestic product (GDP) to be between 0.6% and 1.3%.

“This would mean the 2021 GDP projection of 6.5% growth would now be hovering around 5.2% and 5.9%.

“Upside to growth still remains, depending on external and domestic, ” it said in a report today.

The research house added MCO 2.0, enforced from Jan 13 to Jan 26, was seen as one with less restrictive measures that allowed key sectors to operate.

“For a start, the MCO 2.0 was imposed on five states - Selangor, Penang, Melaka, Johor, Sabah and the three federal territories of Kuala Lumpur, Putrajaya and Labuan due to the worsening Covid-19 situation.

“These five states and three federal territories account for about 66% of the national gross domestic product (GDP).

“Their manufacturing and services activities account for 14.6% and 42% of the national GDP respectively, ” AmBank said, adding key sectors such as manufacturing, industrial, construction, services, distribution and trade, plantation and commodities were allowed to operate and they play a key role to support the supply of basic necessities, ensure uninterrupted supply chains and support critical infrastructure and emergency work.

Combined with the RM325 billion stimulus measures which were expected to be implemented faster and effectively, the research house said steady exports growth from improving global GDP and trade and firmer commodity prices with an upwards revision of 2021 are anticipated.

It projected Brent crude oil price will average between US$50 and US$53 per barrel while the crude palm oil is expected to average around RM3,000 to RM3,200 per tonne.

“On the whole, in taking into consideration the 2021 global economy including Malaysia’s rebound, there is a need for another six to nine months or probably 12 months before the pandemic virus spread starts to ease.

“The domestic economy should hold up well. However, it’s important to recognise that there will be some initial setbacks from the restrictive measures which are more likely to be felt in the first half.

“Still, the outlook is that the global economy including Malaysia’s is set to rebound, ” said AmBank.

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 18
Cxense type: free
User access status: 3

AmBank Research , MCO 2.0 ,


Did you find this article insightful?


50% readers found this article insightful

Next In Business News

Tenaga forecasts rebound in revenue
Mustapa: 12th Malaysia Plan to be tabled when Parliament reconvenes
Biggest players in short-selling are getting a pass
Nothing the stock market does ever scares retail daredevils
US Senate passes US$1.9 trillion relief bill
AirAsia Group plans air taxi, drone delivery service
Tengku Zafrul: Govt tapping into more data for effective aid
AirAsia recovering well via digital transformation
Texas grid operator made $16bil price error during winter storm, watchdog says
CPO futures to see quiet trading next week

Stories You'll Enjoy