CGS-CIMB expects further OPR cut of 25 bps


CGS-CIMB Research foresees that Bank Negara Malaysia may cut the overnight policy rate (OPR) by another 25 basis points next month – going against its initial forecast of an extended pause in OPR cuts.

The research house said that the expectation was in line with the drag on the headline growth of the country’s gross domestic product (GDP).

Previously, Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz said Malaysia’s fiscal deficit is expected to register at 5.8 per cent – six per cent of the GDP this year.

On the other hand, local economists are expecting an even higher deficit, ranging from 6.5 per cent to 7.5 per cent, after taking into account the stimulus packages totalling RM305 billion announced by the government to-date.

“We think monetary and fiscal policymakers are primed to respond with further stimulus, though in more measured doses, as the Conditional Movement Control Order (CMCO) 2.0 is expected to be brief, relative to past rounds,” CGS-CIMB said.

A number of major stimulus measures have been extended until the end of 2020 or early-2021, including the loan moratorium – albeit on a targeted basis; the additional Bantuan Prihatin 2.0 cash aids (RM7 billion), the Wage Subsidy Programme 2.0 (RM2.4 billion), and the Prihatin Special Grant (RM600 million).

“We would not rule out enhancements to fiscal stimulus to tide over the impact of the CMCO, particularly in segments,” it said.

The research house also revised its forecast for 2020 GDP lower to -4.4 per cent from -4.0 per cent due to the CMCO and data disappointment in July and August.

“In our view, this news will dampen market sentiments on concerns that corporate earnings recovery could disappoint due to lower consumer expenditure,” it added.