Domestic demand subdued in coming months: Moody's Analytics

By Farah Adilla - February 9, 2021 @ 11:35am

KUALA LUMPUR: Domestic demand is expected to be subdued in the coming months, as social distancing measures are extended across the country until mid-February, said Moody's Analytics economist Denise Cheok.

Cheok said exports, however, might provide some relief, with strong external demand cushioning some of the downturn. 

In December, Malaysiaʼs industrial production was up 1.7 per cent year-on-year, reversing the previous two months of declines. 

The full-year reading for the industrial production index saw a 4.2 per cent decline in 2020, marking the first yearly decrease since the global financial crisis in 2009. 

Manufacturing led growth, as electronic exports to major trade partners surged. A rise in production of transport equipment also contributed to the increase. 

Meanwhile, mining and electricity continued to fall because of lower oil prices. 

Cheok said in monthly terms, all three sectors saw an increase, despite the domestic movement control measures in place to curb the spread of Covid-19. 

"The fall in oil prices has since started to taper o, which bodes well for Malaysiaʼs mining sector," she said in a report today.

"Optimism due to vaccine rollouts and supply cuts by Opec have buoyed oil prices to near pre-pandemic levels. 

"Nonetheless, renewed lockdown measures in Asia and Europe might weigh down on the demand for oil in the coming months," she added.

Cheok said besides that, the domestic situation had also worsened, with Prime Minister Tan Sri Muhyiddin Yassin extending strict lockdown measures until February 18. 

The extension covers the Lunar New Year period, which will crush domestic demand.

Cheok said December's trade report should provide some optimism for a manufacturing-led rebound in 2021. 

"However, much depends on external conditions, which are currently unstable. Lockdowns in Europe and Asia are still in place, even as countries race to roll out vaccines. 

"Although Malaysia and other Asian countries managed to quickly subdue the initial wave of the virus, it appears that widespread vaccine distribution is necessary for a sustained rebound in the region," she added.