Malaysia’s Lockdown Leads Economists to Lower Growth Estimates

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Malaysia’s new national lockdown to fight a surge in Covid cases could shave as much as two percentage points off economic growth this year, according to analysts’ estimates.

The restrictions that kick in June 1 will be a “bane to recovery” and lead to economic losses of about 1 billion ringgit ($242 million) a day in the first phase, which is expected to last two weeks, CGS-CIMB analysts Ivy Ng, Michelle Chia and Nagulan Ravi wrote in a research note Monday.

That’s milder than the blow from Malaysia’s first round of restrictions last year, which cost the economy 2.4 billion ringgit a day and pushed gross domestic product for April-June 2020 to its worst showing since 1998.

Malaysia’s Lockdown Leads Economists to Lower Growth Estimates

“Growth of around 4% for the year looks increasingly likely, even if it marks a sizable downtick from our earlier expectation of 6%,” said Wellian Wiranto, an economist at Oversea-Chinese Banking Corp. in Singapore. “Like a marathoner with some ways to go before the finish line, the best hope now is that, despite the painful stumble, no serious harm has been done and that the economy can pick itself up again soon enough.”

That’s a larger blow than the one seen by the CGS-CIMB analysts, who cut their GDP estimate to 4.4% from 5.7% earlier. Malaysia’s central bank expects the economy to expand 6%-7.5% this year.

Consumer-related industries are most at risk from steps to limit movement to a 10-kilometer (6.2-mile) radius and close shopping malls except for essential businesses, analysts at MIDF wrote in a research note. That includes retail and wholesale businesses, property, automotive and transport industries.

“We foresee GDP growth for this year to be lower at 4.6%, compared to our previous forecast of 6.2%,” the MIDF researchers wrote.

To be sure, not all analysts are cutting their projections. Although the government bills the steps as a “total lockdown,” many important sectors will remain open at reduced capacity.

That means the impact will be just a “temporary setback,” RHB analysts Sailesh K. Jha, Suresh Rama, and Ahmad Nazmi Idrus wrote Monday. They maintained their full-year GDP forecast at 5.4%.

“With the need to support the economy and given limited fiscal space, we are likely to see some form of unconventional measures by the government,” they wrote. That could include maximizing the debt-to-GDP ratio and repurposing parts of the national budget.

©2021 Bloomberg L.P.

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