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Upward trend in LI boost consumer, investor sentiment – Economists

29th September, 2020

KUALA LUMPUR: The positive expectations in the Leading Index (LI) would lead to improved investor sentiment, boosting consumer and business spending, said economists.

Sunway University Business School economist, Prof Dr Yeah Kim Leng said although the upward trend seen in the LI does not measure the magnitude of the economic recovery, the higher spending enables businesses to recover and keep jobs.

“Barring a second nationwide Movement Control Order (MCO), the readings of the LI suggest that the worst is over for the Malaysian economy.

“It is an encouraging signal that Malaysia is recovering from the sharp 17 .1 per cent contraction in the gross domestic product (GDP) in the second quarter and this would continue in the second half of the year,” he told Bernama.

Last week, the Department of Statistics Malaysia announced that the LI expanded in July this year by 7.7 per cent year-on-year to 109.2 points from 101.4 points.

However, he said since the COVID-19 pandemic continues to escalate, the world economy remains cautious and should be prepared for a second lockdown.

“If there is a strong resurgence of infections, it is likely that only the affected areas will face strict movement restrictions. This should reduce the negative economic impact on the rest of the country.

“It is important to prioritise suppression of the pandemic for economic recovery to be sustainable,” he added.

Amid the threat of the pandemic, Bank Islam economist, Adam Mohamed Rahim said indicators such as Malaysia’s Industrial Production Index (IPI) has returned to a positive growth of 1.2 per cent this July for the first time since February.

“On a sectoral basis, the automotive sector has increased in total industry volume in August this year by 3.2 per cent from August last year.

“Passenger traffic at Malaysian airports has increased for the fourth straight month amid relaxation on restrictions for interstate travel,” he said.

Asked if the government may resume its mega projects smoothly, Adam said the rollouts of new public infrastructure projects in a major way over the short-term are unlikely, given the government’s fiscal constraints.

Notwithstanding, he said there could be news flow on the Mass Rapid Transit (MRT) Line 3 in the upcoming budget as one of the “anchor shovel-ready infrastructure projects” to revive the economy.

Adam also said construction work resumed on the East Coast Rail Line (ECRL) in April this year, with the completion scheduled for December 2026.

“The RM44 billion ECRL project is considered a game changer in transforming the country’s economic landscape, especially along its route alignment areas in Kelantan, Terengganu, Pahang, Negri Sembilan, Putrajaya, and Selangor,” he added.

For the record, foreign investors have so far sold more than RM20 billion net local equities this year. –Bernama

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