Updated: Aug 25, 2021
Malaysia’s improving economic performance will boost investors' confidence and portray a good indicator that the country is going in the right direction, an economist said.
Putra Business School Associate Professor Abu Sofian Yaacob said the strong growth of the Malaysian economy and the increasing gross domestic product (GDP) are positive signs to would-be investors that the country is doing well amid rising cases of Covid-19 infections.
"Although Malaysia is still facing a high Covid-19 infection rate at the moment, we have proven that we managed to increase our GDP, along with the confidence that the vaccination rate is on track towards herd immunity," he told Bernama today.
Earlier, Bank Negara Malaysia (BNM) announced that the Malaysian economy grew by 16.1% in the second quarter (Q2) of 2021, supported mainly by the improvement in domestic demand and continued robust exports performance.
Abu Sofian said that in order for the economy to continue its positive run, the government needs to enforce more stringent measures to ensure that the economic sectors remain in operation with minimum Covid-19 infection risks.
He noted there is also a need to reopen more economic sectors as soon as possible to boost the livelihoods of the people, especially those involved in micro-businesses.
"By allowing those people to reopen their businesses, they will be able to have a more stable income and not entirely dependent on government handouts," he added.
However Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid opined that the economy is still soft and the extension of lockdowns will continue to exert influence over economic activities.
"While the Q2 2021 GDP came in higher, this is merely due to a low base effect. If we compare with the Q2 2019 GDP level, the economy is still contracting by 3.9%," he said.
The central bank today also revised the economic growth target for 2021 to between 3% and 4%, slower than the earlier projection of between 6% and 7%.
Mohd Afzanizam said the GDP forecast revision was warranted in light of the heightened uncertainties on the pace of the reopening of the economy.
"At 3% to 4% forecast range, it clearly shows that the central bank and the government are wary about downside risks."
“That would mean the stand on monetary and fiscal policy are expected to remain expansionary in order to facilitate the recovery process," he said.
Meanwhile, Mohd Afzanizam noted that the prerequisite for a sustainable economic recovery is the speed of the reopening of the economy.
"This will greatly hinge on the vaccination programme which has been proceeding well."
"While the balance of risks is tilted on the downside, the sizable policy support should provide the needed boost once the country has reached herd immunity in the near future," he said.
Source: The Edge Markets