UOB Malaysia sees GDP to grow 6% next year

Various fiscal packages, Budget 2021 measures and cumulative interest-rate cuts to date will provide an impetus for Malaysia’s recovery

by FARA AISYAH / pic by TMR FILE

UNITED Overseas Bank (M) Bhd (UOB) expects the GDP to expand to 6% in 2021, compared to an estimated contraction of 5.5% this year.

UOB Malaysia senior economist Julia Goh said the government’s ongoing policy support through various fiscal packages, Budget 2021 measures and the cumulative interest-rate cuts to date will provide an impetus for Malaysia’s recovery.

“The potential of an effective Covid-19 vaccine rollout, better than expected recovery of the global economy and Malaysia’s diversified economic fundamentals also point to a positive outlook for next year.

“In Budget 2021, the government has planned a sizeable spending of RM322.5 billion or 20.6% GDP to help drive domestic demand, and the multiplier effects of this spending will help boost further GDP growth,” she said at a virtual media briefing yesterday.

She added that extended wage subsidies, reskilling, job creation incentives and other measures introduced in the budget to address labour market challenges will provide hope and optimism for the unemployed and hard-hit sectors such as tourism and hospitality.

Goh said several investment incentives and grants are also put in place to attract foreign direct investments and to accelerate local investments, particularly in strategic high value-added sectors.

These include tax incentives for foreign companies to establish Malaysia as their regional hub for trade and operations, as well as grants for high technology and innovative sectors, and local supply chain improvements.

“Another potential growth catalyst is the progress of large infrastructure projects such as the third Mass Rapid Transit Line 3, East Coast Rail Link, West Coast Expressway, National Digital Infrastructure Plan, Johor Baru-Singapore Rail Transit System, and the Kuala Lumpur-Singapore high-speed rail.

“Moreover, the revival of Petroliam Nasional Bhd’s refinery and petrochemical integrated development complex and the commencement of its floating liquefied natural gas-2 facility will augur well for investments,” she said.

She said UOB Malaysia also expects committed investments in the rubber, electrical and electronics, and healthcare sectors will potentially drive growth next year.

Additionally, Goh said a sharp cyclical rebound in China’s economic growth, alongside moderate recoveries across Asia and other developed countries, will boost global trade and investments.

Other key developments include the recent signing of the Regional Comprehensive Economic Partnership and the outcome of the US presidential election which bode well for a new beginning in trade consultations and negotiations with China.

With the gradual US dollar weakness, stable commodity prices and strengthening of China’s yuan, UOB Malaysia forecasts the ringgit to move towards RM4.05 against the US dollar in 2021.