A ladies is seen in Kuala Lumpur with a Malaysia flag as a background.
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SINGAPORE — A number of economists slashed their 2021 progress forecasts for Malaysia after the nation introduced stricter measures to include a current surge in Covid-19 instances.
The Malaysian authorities imposed an inter-state journey ban nationwide and a lockdown on six states and territories for 2 weeks beginning Wednesday. The nation’s king additionally declared a state of emergency that may final till Aug. 1, or earlier if Covid instances are successfully lowered.
Listed here are some economists who’ve lower their forecasts for Malaysia:
- Capital Economics, a consultancy, stated the Southeast Asian nation will develop 7% this yr — down from its earlier projection of 10%;
- Singaporean financial institution UOB downgraded its forecast from 6% to five%;
- Japanese financial institution Mizuho lowered its projection from 6.7% to five.9%;
- Fitch Options revised down its forecast from 11.5% to 10%.
Malaysia was one of many worst-performing economies in Asia final yr. The Worldwide Financial Fund in October stated the Malaysian economic system would shrink 6% in 2020, reversing a progress of 4.3% within the earlier yr.
Alex Holmes, Asia economist at Capital Economics, stated in a Tuesday report that Malaysia’s newest lockdown “is prone to hit the economic system exhausting.” He identified that the six states and territories beneath lockdown — which embrace capital metropolis Kuala Lumper and Malaysia’s richest state, Selangor — account for 57% of the inhabitants and 65% of gross home product.
The lockdown — regionally known as a motion management order, or MCO — contains banning all social gatherings and dine-ins, closing faculties and permitting solely “important” companies to open.
Many of the remainder of the nation have been positioned beneath much less stringent measures, with most companies allowed to function however actions that contain giant gatherings are banned.
Economists from UOB stated in a Wednesday report that their progress forecast downgrade assumed that the restrictions are prolonged for one more 4 weeks till end-February. However the total financial hit from the most recent measures is probably going “much less extreme” in comparison with final yr when the entire nation was locked down, added the economists.
‘Blessing in disguise’
The state of emergency declared on Tuesday rocked the nation’s shares and forex.
However the transfer will take away near-term political uncertainty that the nation has struggled with previously yr — and that may very well be “a blessing in disguise” for the Malaysian ringgit, stated Lavanya Venkateswaran, market economist at Mizuho.
The forex slipped 0.5% in opposition to the U.S. dollar in a knee-jerk reaction to the state of emergency announcement on Tuesday, but has since strengthened against the greenback and more than recouped those losses.
Malaysia’s Prime Minister Muhyiddin Yassin said there won’t be a curfew under the state of emergency, and the government and judiciary system will continue to function. But parliament will be suspended and elections cannot be held, he said.
Muhyiddin came to power in March last year and has been facing increasing calls from within his ruling coalition to step down and make way for a snap election.
The emergency declaration “removes unnecessary, and self-inflicted political uncertainty that could compromise the policy response to COVID resurgence,” said Venkateswaran wrote in a Tuesday report.
“Instead, a steady policy platform to decisively tackle (the) pandemic with urgency is ultimately a positive for getting the economy back on track,” she said.