KUALA LUMPUR: Malaysia's gross domestic product (GDP) is expected to range 5.0 per cent to 6.0 per cent this year with the likelihood of a choppy recovery, said Hong Leong Investment Bhd (HLIB Research).
The research firm projected the economy to lose RM0.7 billion per day under the current MCO 2.0, assuming that the restriction is extended for four weeks until Febuary 10.
Further, Malaysia could pose case resurgence risk with negative ramifications ahead although the government might relax some restrictions before the Lunar New Year.
"Like most countries, the government is caught in between a rock and a hard place, having to juggle between health and economics.
"We expect the overnight policy rate (OPR) to be cut by 25 basis points to 1.50 per cent in the first-half of 2021. We also lower our end-2021 Bursa Malaysia's key benchmark FBM KLCI target from 1,780 to 1,740 levels," according to HLIB Research analysts.
While there is lower concern of tighter or prolonged MCO2.0, HLIB Research said the high case count may continue to constrain mobility and demand going forward, posing downside risk to Malaysia's GDP forecast.
The potential lifting of Movement Control Order (MCO) in early Febuary, followed by a transition to Conditional MCO would be a near term positive for the economy and should lift market sentiment.
"MCO2.0 could possibly end on Feb 10, four weeks since it began on January 13 and right before the Lunar New Year. Extended businesses operating from 8pm to 10pm and interstate travel for long distant spouses leads us to believe that the bias is towards an early reopening rather than prolonged extension."
It said should MCO2.0 be lifted early-February, mass interstate travel will likely remain banned in the near term, similar to MCO1.0 which ended on May 3 but interstate travel was only allowed from June 10.
HLIB Research said hardest hit sectors are expected to be rebound namely automotive (visitor recovery to showrooms), brewery (out of home drinking), consumer staples (higher purchases from the food service and hotel industries), media (digital advertising expenditure revival), property (sales gallery reopening) and retail (higher footfall, including for mall based REITs).
"However, given our expectation for interstate travel to remain banned, tourism related industries (aviation, hotels, leisure theme park) may continue to face challenging times."
For healthcare, the research firm said lifting of MCO2.0 may not necessarily see a recovery of previously delayed non-critical treatments, given the possible stigma that private hospitals can now accept Covid-19 patients.
While the impending rollout of vaccines may help curb the risk of case resurgence, HLIB Research said there may be a laggard effect.
"We estimate that Malaysia can inoculate 25.8 per cent of its population by end-2021. The government has set a rather ambitious target at 80 per cent of population by the first-quarter (Q1) of 2022."