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KUALA LUMPUR: Malaysia’s economic momentum is set to re-accelerate in the second half of 2021 following the lag impact of expansionary fiscal and monetary strategy, Public Investment Bank Bhd (PublicInvest) said.

The overall sentiment will also be shored up by the rapid Covid-19 vaccination drive, with the nation on track to transition towards the third phase of National Recovery Plan (NRP) by the fourth quarter (Q4) of this year. 

This will underpin a nascent recovery in contact-sensitive service-related sectors like accommodation, leisure, tourism and aviation. 

“This will be further boosted by sustained output generation by manufacturing and agriculture thanks to full economic openings in key regions, improvements in global pandemic conditions and rapid structural changes in the global telecommunication sector. 

“Economic momentum will also be spurred by favourable external conditions thanks to vaccine-powered recoveries in major economies,” PublicInvest said when commenting on Bank Negara Malaysia’s move to keep the Overnight Policy Rate (OPR) steady yesterday.

The firm said Bank Negara’s decision was in line with its and consensus expectations.

“The decision to continue with accommodative policy environment was driven, among others, by generous fiscal assistance following eight Covid-19 fiscal stimulus programmes worth RM530 billion that will be rolled out fully this year.”

PublicInvest said downside risks might come from resurgence in Covid-19 infections that could push targeted containment measures to continue. 

It said a less-than-effective implementation of Covid-19 vaccination might also hurt the recovery of contact-sensitive sectors given the likely delay in the opening of borders and inter-state travel. 

“The impending start of US-China trade talks is also a going concern as this could affect the turnaround of the manufacturing sector,” it added.

“Policy surprises by major economies could also hurt our fundamentals,” it said.

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