Private consumption and services sector to advance in 2021
KUCHING: Distributive trade performance in the first quarter of 2021 (1Q21) to be disrupted by the Movement Control Order (MCO) 2.0, analysts observe but note that private consumption and services sector is to advance in 2021.
The research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) highlighted in the latest economic review on the distributive trade for February 2021 that for distributive trade performance in 1Q21, it is anticipated to be disrupted by the MCO 2.0 which limit consumers’ outside activities and businesses’ operations hence reduce demand.
“It will also slow down domestic tourism activities to some extent while interstate travel are not allowed and international borders remain closed,” MIDF Research said.
In addition, the research arm foresees a temporary setback to the labour market recovery as some businesses may hold hiring due to the lower business activities during the MCO 2.0 period which will affect income prospects.
“This was supported by the consumer sentiment index by MIER for 4Q20 which were down by 6.3 points to 85.2, the lowest reading in three quarters, pointed to deteriorating consumer confidence and a cut into their purchasing power amid challenging labor market conditions which probably rein their spending in upcoming months.”
However, the private consumption and services sector is to advance in 2021.
“Covid-19 has stifled domestic demand in 2020 as consumers reduced spending and tightened their purse string due to high uncertainty.
“This is expected to continue going into the first quarter of 2021 (1Q21) due to the Movement Control Order (MCO) 2.0 which limit mobility and travel.”
“Nevertheless, the recovery in private consumption will be more evident from 2Q21 onward as National Covid-19 Immunisation Programme has kicked off and vaccination rollout will continue by phases throughout the year.”
According to MIDF Research, low overnight policy rate (OPR) and fiscal stimulus packages including the latest Strategic Programme to Empower the People and Economy (PEMERKASA) with Rakyatcentric measures such as iSinar, Bantuan Prihatin Rakyat (BPR), wage subsidy and loan moratorium will continue to provide support to the estimate.
“In particular, blanket withdrawal of i-Sinar could pave way for unaffected or less affected contributors to increase their discretionary spending.
“Consumer inflation is expected to go up this year but remain benign and supportive to consumption.”
The research arm added that services sector in general will also return to positive territory this year but some services involving hotel and aviation are likely to still be pressured by the interstate travel ban and international border closure.