Analysts take on Malaysia’s NRP
IN mid-June, Malaysia’s government announced the National Recovery Plan (NRP) as its post-pandemic exit plan and re-opening of the economy following the FMCO.
The NRP consists of four phases with the transition between each phase is subject to achieving substantive progress in three main thresholds which are; the number of daily cases of Covid19 infections, the capacity of the healthcare system, based on the usage of beds in ICU wards, and the level of the population vaccinated, based on the percentage of people that have received two full doses of the vaccine.
Phase 2 was initially mooted to start in July. However, at the current rate of infections, a nationwide implementation of Phase 2 could be further ahead than expected.
Nevertheless, several states including Sarawak, have recently announced that they have moved on to Phase 2 of the NRP plan, given the decreasing number of cases or the high number of vaccinations.
Analysts believe that the downside risks could continue to weigh on the growth outlook despite exit strategy outline under the NRP.
In a report, the research team at Kenanga Investment Bank Bhd (Kenanga Research) said: “This includes slower-thanexpected progress in vaccination and an unabated surge of Covid19 cases made worse by the emergence of a more infectious Covid-19 variants such as the Delta variant.
“For example, the Delta variant, which first found in India, is now dominant and currently rising in the UK despite more than 70 million or 80 per cent of the population receiving at least one dose of vaccine.”
It also noted that the growth outlook might further be weighed by the possibility of a domestic political wrangling following the expectation that the parliament may reconvene in September or October should the Covid-19 situation come under control.
“Ultimately, if the political situation deteriorate, it may disrupt the tabling of the Federal Budget 2022,” it added.
The timeline of the transition from Phase 1 to 4 is also viewed as longer than expected.
Hong Leong Investment Bank Bhd’s research team (HLIB Research) noted that for comparison, last year’s migration from MCO (started March 18, 2020) to CMCO (May 4, 2020) to RMCO (June 10, 2020) took a total of 2.75 months.
“Nonetheless, the longer duration of this transition is understandable considering that cases are now much higher compared with last year,” it added.
“While the market may see some near term weakness owing to this longer reopening transition, we reckon that this more structured plan with objective thresholds should help control the pandemic in a more sustainable manner.
“Coupled with an expected significant increase in vaccination rates in 2H21 (due to back loaded supply deliveries), we are hopeful for a more permanent return to normalcy by year end. On a brighter note, businesses should experience a gradual recovery from July onwards (Phase 2) owing to increased headcount capacity to 80 per cent from 60 per cent and expansion of the “positive list” permitted to operate,” it opined.