KUALA LUMPUR, June 29 — The economic impact on Malaysia due to the COVID-19 pandemic is expected to be temporary and the country will bounce back, HSBC said.
“We know that the World Bank has downgraded Malaysia’s economic growth to 4.5 per cent this year (from 6.0 per cent estimated in March and 6.7 per cent in December 2020).
“(Our forecast is) actually slightly below that, at 4.1 per cent for this year, in recognition of the very recent challenges that have occurred which are restraining domestic demand growth,” Frederic Neumann, the global bank’s co-head of Asian economics research, told a media conference today on HSBC’s Asian Outlook for the second half of 2021.
He said the challenges faced by Malaysia due to the pandemic were only a temporary drag, with the bank forecasting a 5.4 per cent growth for 2022 as it believed that the country was uniquely placed in many aspects to bounce back from the COVID-19 pandemic.
“One of these areas is in terms of supply chain, where Malaysia receives an enormous amount of foreign direct investments and has a unique position in terms of capturing supply chains moving into Southeast Asia.
“We look at Malaysia as being a structural success story in terms of the country capturing export market shares in global manufacturing. We believe that would come into place more and more as the domestic drag from the current Movement Control Order (MCO) is fading,” he added.
In terms of vaccine delivery schedule, Neumann said Malaysia was actually a bit ahead of its peers and foresaw that by early next year, Malaysia should achieve herd immunity.
In its outlook report, HSBC said Malaysia’s economic losses from the lockdown were likely to be less than during the first MCO in 2020, given that there were now clearer exemptions from the outset, and coupled with the fact that businesses and consumers were better prepared.
“Fortunately, despite significant short-term challenges, Malaysia’s prospects for recovery remain relatively bright. The government has secured enough vaccines for its population this year, including a large share of mRNA vaccines.
“Despite a slow start to the vaccination programme and signs of hesitancy among the population, the pace of daily inoculations has accelerated sharply. We believe a degree of herd immunity is achievable by January 2022, which should allow for a growth of 5.4 per cent in 2022,” it said.
Another bright spot for Malaysia is its resilient manufacturing sector, which should result in robust export growth, even after factoring in a deceleration in June and July, according to the report.
“Malaysia is one of the world’s largest exporters of finished automotive chips and benefits from the current supply shortage. Its biomedical (surgical gloves) and commodity sectors should see sustained volume growth this year,” it said.
HSBC said headline inflation would remain elevated over the short term due to unfavourable base effects and higher oil prices, but subdued demand was likely to keep core inflation low.
“Still, the negative real policy rate is likely to prompt Bank Negara Malaysia to keep monetary policy on hold despite sharp downside risks to its growth forecast,” it added.
