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Malaysia must step up fight against Delta variant to boost economy, AmBank Research says

Malaysia must step up fight against Delta variant to boost economy, AmBank Research says

30 Aug 2021

Malaysia needs more extensive efforts to fight COVID-19’s Delta variant to boost its economy and trade, according to AmBank Research.

It said the variant was likely to further slow the economy’s rebound, as firms and employees were still being held back from returning to office.

“The Delta variant and the regional supply chain disruption will consequently extend the slide in growth,” the research house said in a note.

It noted that exports growth slowed down in July at 5.0 per cent year-on-year due to softer manufacturing shipments which were affected by the contraction of the electrical and electronic (E&E) segment from Movement Control Order 3.0 (MCO 3.0).

However, it said that despite the slower growth now, a recovery was still underway.

“We expect 2021’s full year exports to grow 15 per cent supported partly by a low base, benefits from pre-MCO 3.0 and firm commodity prices,” it said.

AmBank Research also highlighted that foreign demand had propelled export economies such as China, South Korea and Malaysia, but that engine was showing signs of slowing.

In China, it said, both private and official manufacturing Purchasing Managers’ Indexes fell to their lowest levels in over a year in July, suggesting that domestic and overseas demand were cooling off.

Calling for the country to intensify efforts to combat the Delta variant, the research house said the variant was disrupting the momentum rather than causing pronounced economic weakness, so there was a good chance that it would be short-lived.

“Given the region’s tightly integrated supply chains, factory shutdowns in one country can cause problems elsewhere. Even if the immediate threat of the virus subsides in a few short months, its economic impact may linger for quite some time and Malaysia will feel the pinch.

“And if the Delta variant continues to spread fast in Asia while vaccination rollouts fall behind, it can lead to a string of longer term economic impacts.

“Hence, our exports are expected to face headwinds, including supply chain uncertainties, in the coming months,” it noted.

The research house said with the region including Malaysia serving as a base for global manufacturing, lockdowns had already hampered output and this was clearly reflected in its E&E segment.

“The surge of COVID-19 cases resulted to MCO 3.0 and it has impacted the semiconductor supply chain. Disruptions could prolong the supply chain uncertainty well into 2022 due to workers’ shortage arising from this pandemic and strong global demand.

“This would dash any hopes of recovery in second half 2021. Additionally, it will worsen the already-strained global supply chains amid surging shipping costs and shortages of some components,” it added. 

Source: Bernama

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