KUALA LUMPUR: AmBank Research expects the country's economy to show expansion in the first quarter of the year despite the recent resurgence of Covid cases and the restriction measures introduced.
It said in a note that its estimates a bounce in GDP to positive growth following three quarters of contraction.
"Our base case projection suggests an expansion of 0.7% y/y and could surpass the 1.0% level to reach a 1.2%, which appears to be the best case. While the restrictive measures will have some knock-on effects, especially on the services side, the damage to the economy will not be as severe as in the MCO 1.0.
"Economic sectors are still allowed to operate with strict SOPs," it said.
The research house added that the primary growth catalyts for 1Q21 GDP were underpinned by strong trade data.
In 1Q, exports grew 18.2% due to improving growth and trade, an upcycle of global demand for semiconductors, improved demand for manufactured goods and firmer commodity The country's RM340bil in stimulus measures since April 2020 also spurred on a recovery in domestic activities, reflected in the improved Leading Index, loan growth and March manufacturing PMI, which is supported by improved orders and higher capacity utilisation.
Meanwhile, industrial production grew 4% in the quarter, primarily supported by manufacturing activities while domestic-oriented activities grew 5.3%, due mainly to the consumer-related segments.
"Our base case suggests the domestic economy could expand around 6.0% in 2021.
"Stronger global growth and trade, an up cycle of global semiconductors, stronger demand for manufactured goods, firm commodity prices, a pick-up in investments, capital expansion, the rollout of vaccinations, benefits from the stimulus measures and a low base will support growth," said AmBank.
It added that the pace of recovery depends on the vaccination rollout and management of Covid cases in Malaysia and abroad.
The downside to its growth projection is 5%, with the best case at 7%.