COMMENT | A V-shaped recovery in the offing unless …

COMMENT | It feels good to be vindicated when the voices of gloom and doom as a result of a deep contraction of 17.1% in Malaysia’s Gross Domestic Product (GDP) for the second quarter were up on the air in September, we at Emir Research were among a few lone voices then that said it’s not the end of the world yet for Malaysia and stressed that the worst is over.

True enough, when the GDP for the third quarter of this year (3Q20) was announced yesterday (Nov 13), it declines less steeply at 2.7% year-on-year (yoy) compared to the previous quarter’s contraction of 17.1% – a whopping 14.4 percentage-point increase.

When viewed on a quarter-on-quarter (qoq) basis, the picture gets better – the economy in the third quarter grew by a spectacular 18.2% compared to a contraction of 16.5% in the previous quarter.

What’s more, the latest GDP number also beats analysts’ estimate of a contraction of a 3.2% yoy. Moreover, as the diagram from Bank Negara Malaysia (BNM) below shows, the recovery is clearly a V-shaped one.

Emir Research has been writing on a V-shaped recovery for quite some time and being data-driven in our approach, we could see that actual monthly and quarterly economic figures of the past few months and the past two quarters were moving towards a recovery trajectory.

But we are not dogmatic enough to insist it must be at all costs a V-shaped recovery.

Our view is always premised on a conditional situation and this conditional premise pertains to we will only see this V-shaped recovery as the end goal, once vaccines are found, and even this requires the absence of ...