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Positive economic trend to continue — Analysts

Positive economic trend to continue — Analysts

05 Okt 2020

Despite Covid-19 cases not showing signs of abating globally, domestic economic activities have picked up in the third quarter of 2020 (3Q20) and the research arm of Kenanga Investment Bank Bhd (Kenanga Research) expects the momentum to continue rising for the rest of the year.

Kenanga Research gathered that the second wave of infections is not showing that the spread is abating.

“New daily cases in the US were showing higher peaks than the first wave but these second wave peaks appear to be moderating,” the research arm said.

“South Korea warns of a massive second wave as it reported the highest number of daily cases since March and there are new outbreaks in Europe – particularly Spain and France.

“The consolation about this second wave is that, according to Capital Economics, the latest infections in Europe are skewed towards the younger and less vulnerable groups.

“As a result, the pressure on hospitals has been far less acute than it was in the initial wave.”

According to Kenanga Research, because authorities are monitoring the virus numbers closely, they can ratchet up containment measures using a more targeted approach if necessary and avoid a repeat of national lockdowns.

“Although we cannot even say that the pandemic has reached a turning point in containment globally, governments today are more prepared, after having dealt with the spread for over half a year such that economies around the world will, we believe, continue to be allowed to operate business activities in less restrictive conditions compared to when it was tightest in March or April.

“In a local context, we see the measures that are still in place in Malaysia as necessary public health policy that is an economic drag rather than a stalling of business activities like we saw earlier.”

Kenanga Research highlighted that so far, data points suggest the economy is emerging from a record recession in 2QCY20 as shown by decreasing monthly year on year (y-o-y) gross domestic product (GDP) contractions (-28.6 per cent in April, -19.5 per cent in May and -3.2 per cent in June).

In the second half of CY20 (2HCY20), Kenanga Research expected a sequential expansion in GDP of around 11 per cent half on half (h-o-h) although on a y-o-y basis, the research arm projected a 3.7 per cent contraction.

Source: The Borneo Post 

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