Fitch Solutions cuts Malaysia’s 2021 growth forecast to zero
KUALA LUMPUR: Fitch Solutions Country Risk and Industry Research on Monday lowered Malaysia’s real GDP growth forecast this year to zero per cent from 4.9 per cent previously, to reflect higher risk for the third wave of Covid-19 infections.
The Fitch unit said Malaysia’s second quarter economic growth fell far below its previous expectations.
With its view for the third wave of infections to disrupt the recovery in Malaysia playing out to a far greater extent than it had previously expected, it downgraded Malaysia’s GDP forecast this year.
The Malaysian Central Bank announced on Friday that Malaysia’s real GDP grew 16.1 per cent year on year, but fell 2 per cent quarter on quarter.
According to Fitch Solutions, the true picture of the Malaysian economy is best reflected by the negative quarter-on-quarter growth rate that showed the impact of the increasing stringent lockdowns that were implemented in the second quarter.
It also noted that the daily Covid-19 caseload in Malaysia has not improved despite lockdown measures imposed nationwide and the number continues to set new records throughout the first half of August.
While vaccinations in Malaysia are accelerating, the research house opined that it is unlikely to see the country achieve herd immunity before the end of the year, quashing any prospects of a late economic surge in 2021.
It also said all segments of the economy from an expenditure perspective except government consumption are likely to remain stagnant or even contract slightly from 2020 levels.
“We note further downside risks to our forecast given the high level of political risk since the beginning of the second half, and the risk that the outbreak could still worsen over the coming months, which could further affect the economy’s performance,” it said.
Fitch Solutions also noted the domestic demand outlook in Malaysia has darkened considerably, and it now expects Malaysia’s private consumption to do worse than in 2020, while investment will likely only show a marginal improvement.
“With net exports also likely to prove a slight detractor from headline growth due to external demand woes arising from Asia’s struggle with Covid-19 in general, government consumption is now the only source of support for the economy in 2021,” it said.–Xinhua
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