Malaysia Macro: “Now casting” slower 2021 GDP rebound

As the country moved into MCO3.0 in May 2021 and Full MCO Phase 1 in June 2021, we now expect the Malaysian economy to rebound by a slower +4.2% vs +5.1% previously (2020: -5.6%). This mainly reflects slower growth forecasts for services sector (2021E: to +4.2% from +5.1% previously; 1Q 2021: -2.3% YoY; 2020: -5.5%) and private consumption (2021E: to +3.9% from +5.9% previously; 1Q 2021: -1.5% YoY; 2020: -4.3%). Both are the largest component of supply-side and demand-side GDP at 58% and 59.5% of 2020 GDP respectively.

Cushioning the downside to our revised 2021 GDP growth forecast is the return of global economic growth (2021E +6.1%; 1Q 2021 +2.8% YoY; 2020: -3.3%) which is positive for the export-oriented manufacturing sector and external trade. We raised this year’s growth forecasts for manufacturing sector (2021E: to +6.3% from +5.2% previously; 1Q 2021: +6.6% YoY; 2020: -2.6%), exports of goods and services (2021E: to +15.5% from +7.5% previously; 1Q 2021: +11.9% YoY; 2020: -8.9%), and imports of goods & services (2021E: to +18.0% from +8.0% previously; 1Q 2021: +13.0% YoY; 2020: -8.4%). Upward revisions in the external trade growth forecasts also reflect upgrades in in-house forecasts for this year’s average prices for crude oil (Brent) to USD65/bbl (USD55-60/bbl previously; 2020: USD42.3/bbl) and crude palm oil (CPO) to MYR3,100/tonne (MYR2,700/tonne previously; 2020: MYR2,781/tonne).