With a vaccine rolling out this year, the governor of Bank Negara Malaysia (BNM) reports that they forecast the economy will grow by 6.0% to 7.5% in 2021, after a 5.6 per cent contraction in the Malaysian economy in 2020.

“Malaysian economy to rebound in 2021, with the gross domestic product (GDP) achieving pre-COVID-19 levels by mid-2021,” BNM Governor Datuk Nor Shamsiah Mohd Yunus told Edgeprop on Tuesday.

The rebound will be supported by domestic factors. 

“In our forecast, we assumed herd immunity will only be achieved in the first quarter of 2022. We assumed that the international borders will remain closed for this year and the movement control order will be highly targetted,” she said.

Nor Shamsiah pointed out that the potential upsides to its GDP projections include possible pent-up demand amid the historical high savings seen in the country.

“We also didn’t take into account that the government has accelerated the inoculation target where the government is now targetting the herd immunity to be achieved by end of this year,” she said.

On the flip side, the downside risks would be a broad-based lockdown to curb infection and the slower vaccination than anticipated, she said, stressing that overall “the vaccination is key.”

“The vaccine rollout is critical to this economic recovery as the current crisis is a health crisis,” she said.

Therefore, Nor Shamsiah said Malaysia’s phased vaccines rollout started at the end-February will provide some lift to growth, as it supports recovery in employment and income by improving consumer sentiment and facilitating a gradual normalisation in economic activity.