Sharp two-digit rebound in Q2


Speaking with StarBiz, Alliance Bank chief economist Manokaran Mottain expected a 12% to 15% gross domestic product (GDP) expansion in the April to June 2021 period. “This would follow our projected economic contraction of 3% for the first quarter."

PETALING JAYA: The Malaysian economy is set to stage a double-digit growth in the second quarter (Q2) of 2021 as the country moves away from consecutive quarters of economic contractions.

The sharp rebound will be largely driven by the low-base effect, considering that the economy had suffered nationwide business shutdowns in the same quarter of last yeardue to Covid-19 containment measures.

With business activities allowed to resume, supported by a more positive exports demand, economists are projecting a broad-based recovery across key economic sectors in the second quarter.

The manufacturing and services sectors, in particular, will lead the rebound.

Speaking with StarBiz, Alliance Bank chief economist Manokaran Mottain expected a 12% to 15% gross domestic product (GDP) expansion in the April to June 2021 period.

Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid also expected a strong positive GDP growth in Q2 compared with a contraction of 17.1% in the same quarter last year.Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid also expected a strong positive GDP growth in Q2 compared with a contraction of 17.1% in the same quarter last year.

“This would follow our projected economic contraction of 3% for the first quarter.

“I foresee all sectors namely, manufacturing, services, mining, agriculture and construction to record a double-digit growth in the second quarter, mainly due to the low-base effect.

“The improvement in exports and a faster pace of vaccination would further aid economic recovery, ” he said.

In the event interstate borders are opened in the next one or two months, Manokaran said the second quarter GDP growth may exceed the higher end of his projection of 15%.

“However, this seems unlikely considering the rising Covid-19 infectivity rate or R-naught in recent times. Reopening of the borders may be further delayed after Hari Raya, ” he added.

Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid also expected a strong positive GDP growth in Q2 compared with a contraction of 17.1% in the same quarter last year.

He added that the external sector would continue to be the main growth catalyst for the country.

It is noteworthy that the country’s exports surged by 17.6% in February, while the Industrial Production Index rose by 1.5% in the same month.

“However, domestically, the higher number of new Covid-19 cases would mean the reopening of the economy is going to be very gradual.

“Hence, domestic spending may not be able to grow at full blast speed.

“The risks will always be associated with Covid-19 and the extent of the reopening of the economy, ” he said.

Meanwhile, Kenanga Research has upgraded its GDP growth forecast for Q2 to 14.3% compared with 10.3% previously.

This was done to reflect the better-than-expected performance of recent global and domestic economic indicators, injection of additional fiscal stimulus via the RM20bil Pemerkasa package and the imminent release of pent-up demand.

“The double-digit growth brought about by a lower base in the preceding year is broadly-based, steered by the private sector expenditure, particularly in the services sector.

“The kick-off of the second phase of the Covid-19 vaccination drive on April 17 and a possible further easing of movement restrictions in Q2 would allow further resumption of purchasing activities, especially those relying on mobility of consumers.

“With the improved revenue outlook, business sentiment would continue to rise leading to greater investment activities, hence creating positive spillovers to the labour market, ” it said in a note yesterday.

The research house added that externally, stronger economic growth of major trading partners, gradual reopening of international borders and the technology upcycle would catalyse speedy growth in Malaysian exports.

On the demand side, value-added private expenditure is projected to rebound strongly and register its first positive growth of 15.4% after four straight quarters of contraction, contributing 11.5 percentage points (ppt) to Q2 GDP growth.

According to Kenanga Research, the bulk of the rise is attributable to the projected strong rebound of 16.1% of private consumption or 9.2 ppt of GDP growth, while private investment only contributed a projected 2.3 ppt on 13.3% growth.

Meanwhile, public expenditure is expected to contribute only 1.6 ppts to GDP growth on 25% projected growth.

“All in, aggregate demand is projected to rebound sharply to 14.2% after four straight quarters of contraction or 13.1 ppts contribution to GDP growth.

“Net export is projected to continue to contribute positively to GDP growth for the fourth straight quarter, ” it said.

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