In an economic outlook briefing this morning, Affin Hwang projected a GDP growth of 6% for Malaysia this year, but said this may be affected by around 1.5% if tighter restrictions were introduced beyond Feb 18.

“There is a possibility of a further stimulus being announced to help cushion the impact of the MCO.

“Therefore, we expect the government’s fiscal deficit to hover around -5.5% to -6% in 2021, compared to the current projection of -5.4%,” said its chief economist, Alan Tan.

However, Tan said, this would be compensated by an improvement in exports as a result of global economic recovery.

He said the government’s roll-out of Covid-19 vaccines would also spur pent-up demand by mid-year, and the unemployment rate could decrease to 4.5%, except in the tourism sector.

Commenting on Malaysia’s 68% drop in foreign direct investment (FDI) last year, Tan said the figure may improve with investments approved over the last two to three years taking off in the second half of 2021.

Senior associate director Loong Chee Wei remained optimistic about the recovery in the construction sector, now that it was allowed to operate.

He predicted the sector’s earnings to rebound by 11% after contracting by 30% in 2020. The government’s awarding of projects is expected to stimulate the economy, he said.

Loong said some key projects for the year would likely be the revival of the MRT3 and PJ Dispersal Link highway under the 12th Malaysia Plan, as well as rail projects.

While there were concerns over political uncertainty, he said, the current state of emergency meant the government could focus on infrastructure spending without any disruptions or threats in the change of administration.