KUALA LUMPUR, March 5 — RHB Bank Bhd opines that Bank Negara Malaysia (BNM) is focusing on the second half of 2021 (2H21) growth recovery on the back of improvements in global growth conditions.
The central bank was also looking past the potential weakness in economic activity in 1H21 as it kept the overnight policy rate (OPR) at 1.75 per cent on Thursday, RHB group chief economist and head of market research Dr Sailesh K Jha said.
He said the bank had expected BNM to cut the OPR by 25 basis points (bps) to 1.5 per cent as ‘insurance’ against a challenging 1H21 outlook for the economy, similar to the 25 bps seven-day reverse repo rate cut by the Bank Indonesia on Feb 18.
“We were erroneous in making this assumption and now believe BNM will remain on hold for the remainder of 2021,” he said in a note Friday.
However, Dr Jha said the bank continues to believe that weak consumer spending will persist in 1H21, while expecting real private consumption gross domestic product (GDP) growth to contract by 1.7 per cent in the first quarter of 2021 (1Q21) and 2.1 per cent in 2Q21, respectively, versus -3.0 per cent in 4Q20.
He said the headline GDP growth will contract by 6.2 per cent in 1Q21 and record a modest bounce to 0.5 per cent in 2Q21.
“Consumer spending is unlikely to return to the pre-Covid-19 pandemic level in 2021,” he said.
On the supply side of the economy, banks remain cautious in lending, especially towards the construction, property, as well as small and medium enterprise sectors, Dr Jha said.
“On the external front, even though we’re positive on the outlook for the United States growth, the timing of the impact on Malaysia’s economy is unclear,” he said. — Bernama
