GDP to take centre stage
THE main release this week will be the gross domestic product (GDP) data for the fourth quarter of 2020 (Q4’20). Bank Negara is expected to release the data on Thursday.
A Bloomberg poll estimates a contraction of 3.6% year-on-year (y-o-y) in Q4’20 from 2.7% in Q3’20.
UOB Global Economics & Markets Research estimated a contraction of 3% y-o-y in Q4’20 and a contraction of 5.5% for the full year.
It noted that this is the first full-year GDP contraction since the Global Financial Crisis, when the economy contracted by a smaller 1.5% in 2009.
ING economist Prakash anticipated a steeper GDP contraction in the last quarter, by 5.2% y-o-y from the 2.7% seen in Q3’20.
He said this should strengthen its call of a 25 basis points policy rate cut from the central bank this quarter.
The central bank is also expected to announce its foreign reserves position this week.
In addition, the Statistics Department is scheduled to release the industrial production index (IPI) for December today.
Malaysia’s IPI contracted 2.2% in November 2020 compared with the same month in 2019.
Meanwhile, in conjunction with the Chinese New Year holidays, Bursa Malaysia will close the half-day afternoon trading session on Feb 11, and all day on Feb 12.
The Philippines policy meeting
THE Bangko Sentral ng Pilipinas (BSP) will be holding its policy meeting on Feb 11.
A Bloomberg poll of four economists all expects BSP to keep the overnight borrowing rate unchanged at 2%.
UOB also expects no change from BSP. From its perspective, the expected uptrend in inflation and a positive growth outlook painted by the BSP in December have raised the odds of an extended rate pause this year.
The persistence of negative real interest rates and narrowing interest rate differentials with other central banks may also be on the radar of BSP before making any policy rate decision in the near term, according to UOB
Hence, UOB expects BSP to keep the overnight reverse repurchase rate unchanged at 2% until end-2021.
ING do not think the BSP wants to push it even lower and risk a weaker currency and potentially high inflation.
In ING’s view, the BSP easing cycle has run its course. The next move in the policy rates will be higher, though that’s not something for this year or even the next.
A key focus will be on trade data, with updates from both China and Japan.
IHS Markit said the data would provide fresh insights into the extent to which trade flows may be adversely affected by the pandemic and associated supply constraints.Caixin PMI data, produced by IHS Markit, showed a surprise weakening of new export orders for goods from mainland China in January, which could stymie global economic growth.
The Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) dropped to 51.5 last month, the lowest level since June last year and easing markedly from December’s reading of 53.0.
China is also expected to announce its foreign reserves, money supply and inflation figures for January this week.
THE UK is expected to report its first estimate of GDP for Q4’20.
The Bank of England said GDP is expected to have risen a little in the fourth quarter to a level around 8% lower than in Q4’19.
IHS Markit said like the eurozone, UK industry outperformed services during the fourth quarter, in part boosted by pre-Brexit stockpiling.
This should help to limit the decline in GDP resulting from another quarter of lockdowns hitting the hospitality and retail industries.