MIDF REVISES DOWNWARD MALAYSIA GROWTH OUTLOOK

KUALA LUMPUR, March 31 -- MIDF Amanah Investment Bank Bhd has revised downward its projection on Malaysia’s economic growth to 2.7 per cent for this year, against 3.5 per cent set earlier, on the back of a challenging global and domestic environment.

The Movement Control Order (MCO) by the government is adversely affecting private consumption and investment activities, although government consumption is expected to provide some cushion to the impact, MIDF said in its research note.

“We expect a robust rebound in the second half of 2020 as fears over COVID-19 wane.

“The economic growth overall will be influenced by various internal and external factors including disruption in global production and consumption following COVID-19, recession fears, global financial stability, oil price war, inflationary pressure and labour market performance,” it said.

MIDF said it remains cautious that if the epidemic is prolonged, growth would be slashed even further.

It said household spending would be supported by low inflationary pressure, overnight policy rate (OPR) cuts and huge economic stimulus package particularly through people-centric measures.

Significant measures announced in the PRIHATIN Economic Stimulus Package (ESP), including a six- month moratorium on individual loan payments, reduction in the Employees Provident Fund (EPF) contribution rate, EPF Account 2 withdrawal and one-off cash assistance, among others, would result in an increase in disposable income for employees, it noted.

However, household expenditures are likely to be affected by COVID-19 as Malaysia enters the second wave of the outbreak, resulting in the MCO, it said.

“Consumption will be limited as people stay home during the MCO amid a substantial increase in unemployment in badly affected sectors such as hotel and aviation.

“In addition, consumption is seen to be under continuous pressure for a period of time after the MCO as unemployed people might take a while to penetrate the labour market again, considerable numbers of employees are expected to continue working from home and individuals put their vacation plans on hold due to fears of reactivation of COVID-19,” it explained.

MIDF expects private consumption to grow at a softer pace of 5.9 per cent yearly in 2020.

It added that the services sector would experience a slowdown, growing at 4.2 per cent year-on-year dragged down by weak tourism activities especially with the call-off of Visit Malaysia 2020 due to COVID-19.

-- BERNAMA