[ad_1]
KUALA LUMPUR (September 29): It will be a challenge for the Malaysian economy to have another lockdown to contain the spread of Covid-19, said World Bank Group lead economist Richard Record.
Record was addressing concerns about the growing number of new Covid-19 cases in the country, most of which were from Sabah.
Record, in a virtual press conference after the launch of From Containment to Recovery, the World Bank’s October 2020 Economic Update for East Asia and the Pacific, said Malaysia already had high levels of debt, while its fiscal deficit was on a significant scale even before the pandemic outbreak.
Malaysia’s government debt is now around 60% of gross domestic product (GDP), while the country’s fiscal deficit is expected to increase to 6% from 3.4% in 2019 with the implementation of the National Economic Recovery Plan ( Penjana).
“While the response (the motion control order or MCO) was absolutely necessary, it will be difficult for Malaysia to review it again,” Record said.
However, he said Malaysia had done well in terms of its rapid health response and rapid economic stimulus packages to support households and businesses, although they came at a significant fiscal cost.
The challenge going forward, Record said, is to gradually reduce some of these stimulus measures and move towards a more targeted approach to helping those who are particularly vulnerable, as well as seeking to rebuild the country’s fiscal space and balances to prepare for the next. crisis.
While the World Bank baseline GDP forecast for Malaysia for 2020 is now in a greater contraction of 4.9% compared to its previous estimate of a 3.1% decline, following the severity of the production decline in the second quarter and the slow global economic recovery – Record said the contraction could reach 6.1% in the worst or worst scenario.
“But of course, [the low-case projection is possible only] whether there is a resurgence of the pandemic in Malaysia, or the suppression of domestic economic activity and consumption patterns, or a more acute than expected or more sustained impact [from the pandemic] on Malaysia’s economic outlook, ”Record said.
“The health of the population and the health of the economy are two sides of the same coin, so an economic recovery is only possible if the pandemic continues to be repressed and contained,” said Record.
At this juncture, he said that the 4.9% contraction forecast of the World Bank base scenario for the Malaysian economy is the scenario that is most likely to develop, given the recovery of consumption patterns and the recovery in the figures of export, as well as in manufacturing activity.
“Some sectors are still severely suppressed, but we are seeing a move towards a return to growth, possibly in the fourth quarter of the year, assuming continued efforts to contain the pandemic in Malaysia and a gradual recovery of global economic activity,” he added Record.
Going forward, Firas Raad, World Bank Country Manager for Malaysia, said Malaysia’s economic recovery is projected to pick up in 2021 with an estimated economic growth rate of 6.3%, provided that various assumptions are met with regarding containment measures and the resumption of Covid-19. of world economic activity.
This estimate, however, has a large degree of uncertainty surrounding it, given the unpredictability of longevity and the severity of the Covid-19 pandemic, Firas said.
“It is also worth noting that despite the recent increase in public sector lending to combat Covid-19, public debt in general remains manageable, as it is predominantly denominated in local currency, with medium to long maturities. term, ”said Firas.
Private debt, on the other hand, whether family or corporate, is relatively high and continues to pose risks to the financial system, he said.
However, these risks are partially mitigated by high household financial assets and profitability of the banking sector, which is still strong, he added.
Read also:
World Bank revises Malaysia’s GDP forecast for 2020 to further contraction of 4.9%
[ad_2]
