KUALA LUMPUR: Standard Chartered (StanChart) has kept Malaysia's gross domestic product (GDP) growth projection at 7.5 per cent this year from -5.8 per cent in 2020, despite the uncertainties from the second round of the Movement Control Order (MCO 2.0).
StanChart chief economist for Asean and South Asia Edward Lee said while there was some downside risks from the imposition of MCO2.0, the economic impact would be a lot less than in the first MCO implemented in the second quarter (Q2) of 2020.
"This will be supported by a few factors. First, MCO 2.0 appears to be less restrictive and has not been applied nationwide. Second, the world is not in a synchronised lockdown this time around. Third, the ability to cope with restrictions should mitigate the impact of the MCO.
"Fourth, stimulus measures have already been implemented and remain largely in place. Lastly, and most importantly, the promise of a vaccine should help limit the downside hit to confidence," he said at Standard Chartered's 2021 global research briefing today.
StanChart estimates a one-month nationwide MCO would subtract 1.0 to 1.5 percentage points (ppt) from 2021 GDP growth.
"This poses downside risk to our 2021 GDP growth forecast of 7.5 per cent," he said.
Meanwhile, Lee said Bank Negara Malaysia might continue to "wait and see" regarding its key interest rates, given its firmly neutral stance.
"We had previously called for a pre-emptive cut in November, partly due to the worsening pandemic situation domestically.
"However, Bank Negara appeared reluctant to cut further, sounding confident on the growth recovery, despite the resurgence of infections and accompanying restrictions.
"In addition, its governor noted that debt-fuelled growth may not be sustainable and that the focus should shift to structural policies. That said, the risk of another rate cut has increased," he said.
On the ringgit, StanChart Asean and South Asia FX research head Divya Devesh expects the local unit to perform strongly and outperform in Asia, ending the year at RM3.9 against the US dollar.
He said the local currency would be a key beneficiary of improved global trade, higher commodity prices and a stronger Chinese yuan.
Divya said at the current level, the ringgit was about nine per cent undervalued compared to other currencies in the region.