KUALA LUMPUR, July 5 — Maybank Investment Bank has revised its 2021 budget deficit forecast for Malaysia to 6.8 per cent of Gross Domestic Product (GDP) from 6.2 per cent previously.
Chief economist Suhaimi Ilias said this is following the new economic stimulus package announced by the government last week.
“Inflation rate in the first five months has also come back to 2.1 per cent and we estimate the full-year inflation rate at 2.6 per cent for 2021,” he said today at the virtual “Maybank’s Invest ASEAN 2021 Country Week: Market Strategy & Economic Outlook” conference on the market outlook for the second half of 2021.
On the GDP, he said taking into consideration the restrictions as well as lockdowns in the country, Maybank has trimmed the growth forecast for this year to 4.2 per cent from 5.1 per cent previously, gravitating back to its first forecast for 2021 made late last year.
“We believe the GDP would show a sharp slump in May and June because of the tighter restrictions and lockdowns amid the Covid-19. These are dragging the recovery process of the economy,” he said.
Suhaimi said the uneven recovery in economic sectors was apparent especially for non-manufacturing and services which include food and beverages (F&B), accommodation, aviation and tourism which continued to be on a downtrend.
“Growth has been positive for manufacturing sectors such as export-oriented industry, financial, insurance, communications and technology while industries in the wholesale, retail and motor trade may be disrupted due to movement restrictions and lockdowns,” he said.
He said the global GDP rebounded in the first quarter of this year by 2.8 per cent and Maybank estimates it would grow to 6.1 per cent this year, an upward trajectory from its earlier estimate 5.8 per cent, largely due to revision in the US economy which is now expected to grow by 6.4 per cent compared with 5.8 per cent previously.
Meanwhile, in terms of policy developments and outlook, he said Maybank has maintained its view that Bank Negara Malaysia (BNM) would keep the Overnight Policy Rate (OPR) at 1.75 per cent until the end of this year, partly due to the assumption of a moderate comeback of inflation.
He said there is also “passive easing” in the form of negative real OPR whereby BNM also looks at financial conditions and several indicators that the government monitors including the sovereign yield spreads, credit spread as well 10-year Malaysian Government Securities yields which recently eased.
“There has been no tightening in these indicators. Besides, the output gap is also negative and we expect it to remain until the end of this year due to the soft job market conditions and higher unemployment rate because of the restrictions and lockdowns.
“Overall, we think the negative output gap of job market conditions means core inflation has actually been muted. It is low and stable amid the up and downswing in the headline inflation,” he added.
— Bernama
