KUALA LUMPUR: Malaysia is well-positioned for an economic recovery in 2021 as it is poised to leverage on the uptrend in external demand for commodities and manufacturing as well as its lower reliance on tourism and services exports compared to regional peers like Singapore and Indonesia, said CGS-CIMB.
The research house said other strengths that stand Malaysia in good stead are a bipartisan commitment to fiscal expansion and relatively ample policy room to enhance monetary accommodativeness, report agencies.
The research house said the gradual rollout of the COVID-19 vaccine is a key catalyst for a global recovery in 2021, whereby the International Monetary Fund expects global GDP to rebound 5.2 per cent in 2021 from -4.4 per cent in 2020.
According to CGS-CIMB, Asia is set to be an outperformer, anchored by China which is projected to grow 8.2 per cent in 2021 (1.9 per cent in 2020), which bodes well for Malaysia, Indonesia, Singapore and Thailand.
Meanwhile, it said monetary policymakers have shown an inclination to look past near-term risks as Malaysia pivots to a path of economic recovery, pointing to a high likelihood of further policy easing.
“We believe the current Overnight Policy Rate (OPR) marks the floor of the current easing cycle and reiterate our end-2021 OPR forecast of 1.75 per cent.
“We do not expect monetary policy normalisation to begin until after 2021, when Malaysia’s output gap and inflation trends converge towards equilibrium levels,” it added.
It said the availability of COVID-19 vaccines starting the first quarter next year is an extra stimulus for the economy, plus potential upside from relocation foreign direct investment amid the supply chain security, resilience and regionalisation arising from the US-China tension, pandemic and Regional Comprehensive Economic Partnership (RCEP).
“The government has signed agreements to procure COVID-19 vaccines under the World Health Organisation’s (WHO) COVAX programme and obtain 12.8 million doses from Pfizer. These two agreements enable the vaccination of 30 per cent (9.6 million) of the 32 million population during the course of 2021.