KUALA LUMPUR, Nov 1 — MIDF Research expects the economic activities would continue to recover in line with states transitioning to the final phase of the National Recovery Plan and further relaxation of the lockdown restrictions.
In its Monthly Economic Review, it said the recovery in domestic spending and business activities would support the gross domestic product (GDP) growth from the fourth quarter of 2021 (4Q21) onwards as confidence improved following the reopening of the economy and improving local Covid-19 situation.
“Moreover, Malaysia will continue to benefit from the growing global demand, particularly for electrical and electronics (E&E) products and commodities.
“Although the full lockdown will drag down growth in 3Q21, we expect the economy will return to a recovery path from 4Q21,” it said.
MIDF Research said while it maintained its 2021 GDP growth forecast at +4.6 per cent year-on-year (y-o-y), it remained cautious that the risks to the outlook may come from the global supply chain bottlenecks, China’s economic slowdown, and the uncertainties surrounding the global health crisis.
Meanwhile, the research firm noted that Malaysia’s leading index (LI) contracted by -2.3 per cent year-on-year (y-o-y) in August 21 (July 21: -4 per cent y-o-y).
The slower decline in LI signals an improvement in Malaysia’s growth momentum in the near term.
The downward drag in the LI reflected the reduction in the number of housing units approved during the month. Compared to the previous month, the LI rebounded and increased by +1.1 per cent month-on-month (m-o-m) against July 2021 of 0.6 per cent m-o-m, the first monthly expansion after four straight months of decline.
The monthly rise was underpinned by increases in expected manufacturing sales value; Bursa Malaysia Index; real imports of other basic precious and other non-ferrous metals; and real imports of semiconductors, it said.
The research firm said the improvement in the current economic conditions was reflected by the slower contraction of -1.1 per cent y-o-y in the coincident index (CI) (July 2021: — 5.2 per cent y-o-y), attributable to the recovery in domestic manufacturing and consumption activities amid the easing of restrictions and transition of states to the next phases of the National Recovery Plan.
It also expects the producer price index (PPI) inflation to remain elevated underpinned by the challenges from supply chain bottlenecks, logistic delays, as well as high energy and input prices.
“Not only the PPI inflation remaining above the consumer price index (CPI) inflation since January 2021, but the gap also widened in the recent months as PPI inflation accelerated further vis-à-vis a more stable CPI inflation.
“Therefore, we foresee consumer prices will continue to increase as producers pass the cost increases to consumers,” said MIDF Research. — Bernama
Source: Malay Mail
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