PETALING JAYA: S&P Global Ratings has lowered its growth forecast for Malaysia to 3.2% in 2021 from 4.1% earlier.

       “Strong international trade is providing a sizeable buffer for growth this year. However, domestic demand is looking weaker. Lockdowns to manage the ongoing pandemic wave have now been in place for around three months.

       “The deeper downturn has cut activity in the services sector and is resulting in sizeable job-losses – in June the unemployment rate jumped to 4.8% from 4.5% in May,” S&P said in a statement yesterday.

       Nonetheless, the rating agency noted that Malaysia now had a relatively high vaccination coverage, with about 52% of the population having received at least one dose.

       This would enable a gradual re-opening of the economy over the next several months. S&P expects Malaysia’s gross domestic product (GDP) to grow 6% in 2022, 5.2% in 2023 and 4.6% in 2024.

       Employment job trends

       Meanwhile, it commented that emerging South-East Asian economies continued to face intense headwinds from persistent Covid-19 pandemic waves.

       The duration and severity of the pandemic has been more adverse than its previous baseline expectations, resulting in the rating agency’s downward revision of 2021 growth expectations for a number of economies in the region.

       “A fresh slump in demand in emerging South-East Asia is hitting sectors that have already faced a challenging year,” said Vishrut Rana, Asia-Pacific economist at S&P Global Ratings. “As the pandemic drags on, balance sheets will deteriorate for households, small and midsize enterprises, banks, and the wider economy, leading to more medium-run economic scarring.”

       It expects policy settings across the region to remain steady, noting that central banks are wary of easing further. It added that new fiscal stimulus measures announced this year in South-East Asian economies have been more limited in scope, given that the fiscal policy space was significantly eroded during the initial pandemic escalation in 2020.

       “Overall public spending is still set to support growth during the year based on previously announced measures and government budgets for the year,” it said.