Further revisions to growth forecast expected

Year: 2020

In response to the revised GDP forecast released by MAS, FMG CEO Devadas highlights that further revisions are expected given the structural damage to the economy and uncertain global conditions:

“The MAS’s survey of ‘private-sector economists’ shows that they have on aggregate revised their forecast for FY2020 GDP from -5.8 to a 6% contraction.

In March this year, FMG issued a forecast of a -9% to -7% contraction which we revised mid-year to -10 to -8%. We note the strong counter-cyclical measures implemented by the government. Without which actual GDP performance would already be much worse.

We expect the MAS to revise their Q2 figures to reflect an even worse performance than -13.2 once lagging data is imputed. We continue to be more pessimistic than the conventional sources and maintain our forecast for a -10 to -7% contraction range with loading to the midline. This is due to structural damage to the economy from government policy, free falls in the US and Indian economies from mal governance of COVID and anaemic performance of EU nations and degrading performance of ASEAN nations.

We also price in the upside potential for further shocks from sovereign debt bubbles, a continuation of the rising costs of trade as well as the outside chance of US-China conflict.

We acknowledge the government’s efforts but we expect much of it to be dead weight and obstructive of necessary creative destruction which may weaken long term prospects for growth.”