Economists cut forecasts for Malaysia’s growth after new Covid lockdown and state of emergency

A girls is seen in Kuala Lumpur with a Malaysia flag as a background.

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SINGAPORE — Several economists slashed their 2021 growth forecasts for Malaysia after the nation introduced stricter measures to comprise a current surge in Covid-19 instances.

The Malaysian authorities imposed an inter-state journey ban nationwide and a lockdown on six states and territories for two weeks beginning Wednesday. The nation’s king additionally declared a state of emergency that may final till Aug. 1, or earlier if Covid instances are successfully lowered.

Here are some economists who’ve cut their forecasts for Malaysia:

  • Capital Economics, a consultancy, mentioned the Southeast Asian nation will develop 7% this 12 months — down from its earlier projection of 10%;
  • Singaporean financial institution UOB downgraded its forecast from 6% to five%;
  • Japanese financial institution Mizuho lowered its projection from 6.7% to five.9%;
  • Fitch Solutions revised down its forecast from 11.5% to 10%.

Malaysia was one of the worst-performing economies in Asia final 12 months. The International Monetary Fund in October mentioned the Malaysian financial system would shrink 6% in 2020, reversing a growth of 4.3% within the earlier 12 months.    

Alex Holmes, Asia economist at Capital Economics, mentioned in a Tuesday report that Malaysia’s newest lockdown “is likely to hit the economy hard.” He identified that the six states and territories beneath lockdown — which embrace capital metropolis Kuala Lumper and Malaysia’s richest state, Selangor — account for 57% of the inhabitants and 65% of gross home product.

The lockdown — domestically known as a motion management order, or MCO — contains banning all social gatherings and dine-ins, closing colleges and permitting solely “essential” companies to open.

Most of the remainder of the nation have been positioned beneath much less stringent measures, with most companies allowed to function however actions that contain massive gatherings are banned.

Economists from UOB mentioned in a Wednesday report that their growth forecast downgrade assumed that the restrictions are prolonged for one other 4 weeks till end-February. But the general financial hit from the most recent measures is probably going “less severe” in comparison with final 12 months when the entire nation was locked down, added the economists.

‘Blessing in disguise’

Malaysia’s Prime Minister Muhyiddin Yassin mentioned there will not be a curfew beneath the state of emergency, and the federal government and judiciary system will proceed to operate. But parliament might be suspended and elections can’t be held, he mentioned.

Muhyiddin got here to energy in March final 12 months and has been dealing with growing calls from inside his ruling coalition to step down and make method for a snap election.

The emergency declaration “removes unnecessary, and self-inflicted political uncertainty that could compromise the policy response to COVID resurgence,” mentioned Venkateswaran wrote in a Tuesday report.

“Instead, a steady policy platform to decisively tackle (the) pandemic with urgency is ultimately a positive for getting the economy back on track,” she mentioned.

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