RHB maintains GDP forecast at 5.4%


RHB Banking Group has maintained its forecast that the Malaysian economy is set to grow at 5.4% this year despite various other firms and government reducing projections due to the impact on the economy from the total lockdown in place in some states.

Its chief economist Dr Sailesh Kumar Jha said the recovery in consumer spending in the country during the second half of the year (2H21) will enable the forecast to remain.

“We basically have a fairly bit of contraction in private consumption growth on a quarter-on-quarter basis of the second quarter (2Q) taking into account that June is going to be a bad month and essentially taking the idea that July will be effective in terms of consumer spending.

“On our numbers, it is difficult to generate a number below 5% for Malaysia. That is the reason we are maintaining our view at 5.4% growth in GDP,” he said during RHB’s 3Q21 Global Market and Economic Outlook briefing last Friday.

Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz had previously said the government is in the midst of measuring the economic impact of the lockdown and revising the country’s GDP growth.

Prior to the announcement on the lockdown, the minister had estimated the third round of Movement Control Order which was supposed to be enforced between May 25 and June 7 would cut economic output by 1% and lower GDP growth forecast to between 5% and 6% in 2021.

The World Bank has slashed its GDP growth projection for the country to 4.5%, which is the second time the forecast was revised this year due to the worsening Covid-19 conditions.

In December 2020, it projected Malaysia’s GDP to grow at 6.7% before lowering it to 6% in March.

Sailesh said the US dollar is expected to continue to trend higher for the long term to reflect the increase in US treasury 10-year bond yields which will average between 1.7% and 1.8% in 3Q20 and 1.8% and 2% in 4Q20.

He reiterated the ringgit greenback exchange value to hover between 4.15 and 4.20 in 2H21 before rising to 4.30 in 1Q22.

“The ringgit is depreciating against the dollar as we have been seeing dollar hoarding by corporate and some other entities.

“Despite having a pretty decent trade balance, those dollars have not been converted into ringgit due to a whole host of issues,” he said.

Despite the ringgit’s depreciation against the dollar, Sailesh noted Malaysian exporters would be able to benefit from the weaker currency.