Gov't To Downgrade 2021 GDP Projection, Seek Approval For Lifting Debt Ceiling

Spot USD/MYR has lost ground, likely on the back of broader market flows in reaction to the well-documented CNBC story re: China's continued approval for U.S. IPOs by Chinese firms. This has overshadowed an ongoing parliamentary testimony from Malaysian FinMin Zafrul.

• The minister put a number on the cost of the latest round of mobility restrictions, noting that it results in daily economic loss of MYR1.1bn (vs. MYR2.4bn in the first lockdown last year). Zafrul said that 2021 GDP growth is expected to miss earlier forecasts and the updated projection will be announced in August.
• According to Zafrul, additional relief measures will push fiscal deficit to 6.5%-7.0% of GDP this year from the 5.4% estimated in the 2021 budget. Gov't statutory debt will reach 56.8% of GDP by the end of the month, which is below Malaysia's self-imposed ceiling of 60%. Nonetheless, the government will seek lawmakers' approval to lift the debt ceiling, while committing to fiscal consolidation once the economy recovers.
• Spot USD/MYR last seen at MYR4.2215, 128 pips worse off on the day. The rate is testing support from Jul 22 low and a break here would shift downside focus to Jul 15 low of MYR4.1955.