Economic recovery remains uneven as Covid cases surge


MALAYSIA’S economic recovery is still uneven amid downside risks from the rise in Covid-19 cases, delays in vaccine rollout and overall efficacy of vaccines.

United Overseas Bank (M) Bhd’s senior economist Julia Goh said virus and vaccines are still key in the economic recovery process, adding that the earlier the situation is brought under control, the better for business prospects.

“It’s about two halves; the first half (1H) is still about containment, vaccine rollout and for the government to continue some of the stimulus support, and the 2H is about driving the economy.

“For Malaysia, the risk is obviously in terms of containing the current infections. The one thing that we are really watching is the vaccine rollout because that is the underlying assumption for recovery,” she said in a webinar hosted by InvestPenang recently.

Goh said in addition to Malaysia’s restricted vaccine supply, vaccine hesitancy may also be a hurdle as it may affect people to register for inoculation.

“With only nine million people having registered on MySejahtera, it shows there is still a lot of hesitation. Hopefully, by 2H of this year (2H21), we can see a faster pace of vaccine rollout now that Phase 2 is underway,” she said.

Prior to the resurgence in Covid-19 infections, Bank Negara Malaysia’s outlook on the country was relatively upbeat, in line with broader market views.

The central bank projects Malaysia’s GDP to grow by about 6%-7.5% this year, while market consensus is about 5%-6%.

“Markets are slightly more conservative on looking at 5% GDP growth mainly due to concerns about the resurgence in infections, whether it will affect the recovery and also private consumption.

“We feel that unemployment rates are still very high and it might take private consumption longer to recover. Having said that, we have seen an increase in pent-up demand after the government reopened the economy,” Goh said.

Goh said Malaysia’s uneven recovery alludes to a two-track recovery where the exports and manufacturing side is doing very well, but the services and domestic side is still lagging.

“The latest export data shows a 30% growth in March. However, retail, recreation and social activity have taken a dip from the surge of infections, albeit not as severe when the reinstated Movement Control Order first started this year.

“It’s safe to say that a 5%-6% growth can be achieved,” she said.

Goh expects the prime driver in 2H21 will be on the global recovery, stronger exports and higher manufacturing activity. Other drivers include strong commodity prices as well as the resumption of the country’s mega-projects.

Goh also anticipates Malaysia and Asean will benefit from recoveries in the US and China through trade and investment channels, while changes in markets and supply chain configuration will continue given the uncertain US-China relationship.

“Both the US and China are on their recovery paths, though they each face challenges at home. Their relationship is yet another uncertainty,” she added.