KUALA LUMPUR: United Overseas Bank (Malaysia) Bhd expects Malaysia's gross domestic product (GDP) to grow by 5.0 per cent this year and a return to pre-pandemic levels will likely be in 2022.
Managing director and country head of Personal Financial Services, Ronnie Lim said the revised target was made after the reinstatement of the Movement Control Order (MCO) 2.0 in all states except Sarawak to curb the rise in Covid-19 cases.
"Malaysia may suffer an estimated economic loss of RM12 billion in 2021, assuming the affected states will be under strict MCO until the end of February with essential business sectors operating with only up to 70 per cent capacity," he said in a statement today.
However, he said the current restrictions are less severe compared with those imposed during last year's MCO as essential sectors are allowed to operate for a smooth flow of operations, business continuity and economic recovery.
"The government will continue to roll out fiscal and monetary policy to sustain the economic recovery. Additionally, the country's first vaccination plan is scheduled to begin at the end of the first quarter – another reason to be optimistic," he said.
Lim said the government's declaration of the state of emergency until August 1 this year was largely to ensure that no major political events, including elections, can be conducted as long as the proclamation is in effect.
"There are no curfews and economic activity is allowed to continue. This should result in greater government focus on containing the pandemic and implementing policies to sustain the economic recovery."
The key downside risks for Malaysia include lapses in containing Covid-19 infections, domestic political uncertainties despite the emergency proclamation and that the country's recovery depends significantly on what happens globally.
The bank said a full global economic recovery will likely require widespread vaccinations worldwide, continued government stimulus as well as stronger business and consumer sentiments.
It added that the rollout of additional government measures earlier this month in response to the current surge of Covid-19 cases in Malaysia shows that the recovery journey can be bumpy.
Lim said countries and industries that were supported by ongoing government stimulus can recover strongly this year, especially if Covid-19 vaccinations start by the middle of 2021.
"As more people around the world are vaccinated, governments can slowly lift pandemic-related movement and travel restrictions, which will help the global economy to rebuild gradually in the second half of 2021."
He said central banks will continue to keep monetary policy loose to support economic recovery. However, the recovery chart is expected to show diverging paths as some regions and sectors will emerge from the recession sooner and in better shape, while others that have been harder hit will recover more slowly.