Wednesday, 11 November 2020

Will GDP Rebound 6.5%-7.5% in 2021?


The grand expectation is GDP will improve from -5% (2020) to +6.5% or above in 2021. That’s a miracle! There is some improvement in Q4 2020 but not enough to talk about “green shoots”. Then again with CMCO extended further in geographical coverage and period, we must delay any hope of recovery. But not so for our Minister of Finance who seems oblivious to the fact!

But the Government is forecasting nearly every sector to show good to satisfactory growth.

Advanced economies are forecasted to rebound by 3.9% in 2021 (and not over 5% as some seem to think), spurred by domestic demand and trade. China is expected to lead the recovery with a growth of 8.2%. World trade is anticipated to rebound by 8.3% in 2021. Projections by McKinsey and IATA anticipate improvements in Q3 2022 or 2023, why? Covid-19 is still with us and no vaccine is in sight other than promises by Trump! Then there is a gestation period – distribution and acceptance (of vaccine) before confidence to travel, to do business and perhaps a return to a level of normalcy.

Meanwhile, it is better to be cautious and anticipate growth in the region of 3.5%-4% in 2021.Granted, we had V-shaped recoveries in the last two recessions.

 In a post-coronavirus environment, there are strategies to enhance growth:

·       Investing in basic and green infrastructure – these technologies could generate 3x more jobs than investment in fossil fuels;

·       Building digital capabilities – which in some sense was addressed;

·       Creating high-value food industries – raising farmers’ productivity and enhancing food security.

To position Malaysia for the future, the above three levers will certainly assist. But the key to staying ahead of the game is a strong R&D eco-system. That’s where public-private partnerships will thrive if Government plays the lead role (initially).

But the R&D allocated (RM400 million) were to the Tik-Tok Ministry (Higher Education), “Warm Water” Health Minister and “Doraemon” Minister, Rina Harun. What a load of rubbish? Shouldn’t you do allocations for renewable, resources (oil palm/ rubber) and electronics sectors?

We are not in a transition to a more developed economy but primed for a change in the current political landscape!

 

Reference:

GDP to rebound between 6.5% and 7.5% in 2021, The Star, 7 Nov 2020

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