Malaysia's diverse exports to help mitigate lockdown impact - Moody's

Malaysia imposed the nationwide Movement Control Order (MCO 3.0) starting June 1 after daily cases hit 8,000.

From an initial two weeks, it was extended for another two weeks to end on June 28, 2021.

In its latest report, the ratings agency said the resurgence in coronavirus cases, along with low vaccination rates in the Asia Pacific (APAC), pose renewed risks to domestic demand, although the recovering global trade will support the region's more export-oriented economies.

"Fresh movement restrictions to stem the spread of the virus will curb domestic demand and dampen consumer confidence.

"Meanwhile, vaccination rates are low in most parts of APAC, with only Maldives, Mongolia, Singapore and China having administered a first vaccine dose to at least 40 per cent of their populations," said Nishad Majmudar, Moody's assistant vice-president and analyst.

But in economies that are more export-oriented, including Vietnam (Ba3 positive), Taiwan, China (Aa3 positive) and Malaysia (A3 stable), large contributions from trade will compensate for weak domestic demand and bolster output - as long as coronavirus-related closures of factories and export-processing sites are limited.

Vietnam's robust exports have helped its economy grow amidst the pandemic -- its exports expanded eight per cent in the first quarter of 2021 (Q1 2021) compared with Q4 2020 on a seasonally adjusted basis.

Likewise, in Taiwan, exports grew eight per cent in Q1 2021 from Q4 2020 and 16 per cent from a year earlier, powering an 8.9 per cent surge in gross domestic product (GDP).

"Malaysia's diverse export destinations and products should help to mitigate the impact of the extension of its national lockdown through the end of June.

"Moody's forecasts a growth of 7.2 per cent, 4.2per cent and 5.3 per cent, respectively, for these economies," it said.

Meanwhile, the rebound will be more tepid for economies that are also dependent on international tourism, such as Thailand (Baa1 stable).

Moody's expects Thailand's GDP to expand 2.8 per cent in 2021 -- a relatively shallow pickup from a 6.1 per cent contraction in 2020, reflecting the lagged recovery in the tourism industry.