[ad_1]
KUALA LUMPUR (May 13): Despite registering moderate growth in Gross Domestic Product (GDP) of 0.7 percent in the first quarter (Q1) of this year, analysts and economists continue to rely on Malaysia’s prospects in the Next six to 12 months, suggesting that the construction, transportation, and information technology (IT) sectors will be the key drivers of future economic growth.
Bank Negara Malaysia (BNM) announced today that the Malaysian economy grew moderately to 0.7 percent in 1Q20 from 4.5 percent in the same quarter last year, as GDP growth was affected by COVID-19 and implementation of the Movement Control Order (MCO).
The Central Bank said economic activity was drastically reduced with the MCO’s implementation on March 18, including international and national travel restrictions, limited hours of work and operation, and mandatory social distancing significantly reduced economic activities.
Dr. Mohd Afzanizam Abdul Rashid, chief economist at Bank Islam Malaysia Bhd, said that GDP growth in 1Q20 was within the target range of a one percent projection.
“The prospects for the next six months will largely depend on how soon the government can reopen the economy. This will depend on the evolution of new cases.
“Until now, the infection curve has been flattened. This has provided room for the reopening of the economy. Therefore, we can expect the economy to start recovering as early as the fourth quarter of 2020, “he told Bernama.
The research manager of the Institute for Democracy and Economic Affairs (IDEAS), Lau Zheng Zhou, said that the reading of GDP growth came within expectations because the economy in the first two months of the quarter expanded steadily and that It helped offset the drastic decline in economic activity with the implementation of the MCO.
“The recovery of the Malaysian economy also depends, to a large extent, on the recovery of the global economy.
“Malaysia has performed remarkably well compared to other more developed countries in managing the pandemic and the economy is in a favorable position to take advantage of opportunities to regain global slack and promote a faster recovery,” he told Bernama.
Lau said the second half of the year is expected to be more positive than the first as the economy gradually recovers from the MCO’s socio-economic implications.
“While we can still post a technical recession by 2020, the recovery from the pandemic, including reducing the human restraint movement, is likely to lead to positive side effects and further optimism in 2021.
“As things stand, short-term business disruptions and uncertainties about the future have led to a record unemployment rate, which in turn affects consumer and investment decisions,” he added.
He noted that some companies continue to adopt a wait-and-cut approach to ensure survival while waiting for greater clarity before making new hiring and investment decisions.
“Therefore, the next government economic recovery plan is expected to provide guidance on future growth opportunities, in addition to provisional financial assistance measures,” Lau said.
Meanwhile, Mohd Afzanizam said the construction sector will recover, as the government is likely to accelerate the implementation of infrastructure projects as soon as possible to support economic growth.
“We have seen that public investment remains weak and this is not good for private investment.
“Already, the Purchasing Managers Index (PMI) and the Business Condition Index indices showed that commercial sentiments are very pessimistic. So the construction sector needs a catalyst,” he said.
Lau, however, said that as the pandemic situation improves, sectors that were previously detained by the MCO should see a rebound, such as the transportation sector.
But the cost of compliance with observing Standard Operating Procedures (SOPs) and the continued risk of a second wave of infection will continue to affect the recovery of the sector.
“Global manufacturers have also learned from this incident that they should diversify their involvement in the supply chain outside of China, thus creating opportunities for local manufacturers to fill the gap.
“While China has shown early signs of its economic recovery, it may not be enough to spur a global recovery, but at least if Malaysian manufacturers can attract foreign direct investment due to this reconfiguration of the supply chain, then we will recover. faster than the rest. Global demand is rebounding, “he added.
Professor Mohd Nazari Ismail, from the Faculty of Business and Accounting at the University of Malaya, said the IT sector may experience growth, especially in subsectors related to online services.
He said that the impact of the pandemic has shown that digital connectivity is critical to social resilience and business continuity in times of crisis, and for these infrastructure providers, there would be an increased demand for connectivity that could be offset by a series of negative shocks.
In the future, Lau said the government should consider increasing its development costs, such as improving digital infrastructure, as well as transportation and logistics.
“Previous stimulus packages have been effective in stabilizing the economy in the short term, but the public sector should consider expanding its role in infrastructure spending as a means of generating long-term benefits, such as productivity growth and higher value. added, which will also mean greater fiscal capacity in the future.
“The government should also consider regional cooperation in addition to implementing the recovery policy individually.
“ASEAN member states should work together to abolish trade and non-trade barriers in medical and food supplies so that not only can these essential items be properly produced; It could also create a new market and increase economic activities, “he said.
