KUALA LUMPUR: Malaysia's economy is likely to grow 5.1 per cent this year after an expected contraction of 5.4 per cent last year, said Maybank Investment Bank Bhd (Maybank IB).
The bank's chief economist Suhaimi Ilias said the return to growth in 2021 would be broad-based, both on the supply side of the economy where all the sectors were expected to register an expansion.
"The demand side will also see other components such as consumer spending, investment and trade to accompany public consumption in registering positive figures," Suhaimi said at a media briefing today.
He expects Bank Negara Malaysia to maintain the Overnight Policy Rate (OPR) at 1.75 per cent this year.
"The third wave of Covid-19 that has caused a spike in cases will continue to be a downside factor especially in terms of reopening the borders.
"We have seen the plans of Singapore and Hong Kong to open their travel bubble have been suspended due to this," he said.
Suhaimi said the pandemic had yet to be flattened with the resurgence of new mutation in certain parts of the world.
"Infection rate is severe due to the new wave. This has prompted some restrictions domestically, which has affected the mobility. Hence, there is sensitivity on restriction to gross domestic product (GDP).
"GDP has correlation to mobility. The issue of pandemic is still ongoing," he said, adding that attracting foreign direct investments (FDI) into the country was reliant on several factors such as function of cost, political stability and policy overhang.
"We need to clear the policy for investment incentive. It does create situation as invest adopt wait and see to get the policy.
"With the 12th Malaysia Plan delayed to March, investors will adopt a wait and see attitude while awaiting for more clarity in terms of policy. As we see, the 2021 Budget has incentive for FDI with high-value," he said.
He said the job market would remain volatile even with some having returned to the workforce. "However, our concern is on under employment which will be an issue on the labour market."
On the ringgit outlook, he said the local note could reach 3.90 by the year-end on softer US market outlook as well as some other wildcards including US-China trade tension.
He said the crude palm oil was expected to average at around RM2,500 per tonne, while Brent crude front might hover at US$45.50 per barrel for 2021.
Maybank IB regional co-head oil and gas research Liaw Thong Jung said most oil and gas (O&G) players would be cautious in spending in terms of operational and capital expenditures.
"The market is cautious in terms of the rollout of vaccine and how well it affects demand for O&G. For 2021, the market is getting more optimistic. Worst is over. The market might see pocket of development, spending at money scale and management of dividend and cash management, divestments and merger and acquisition activity," he added.