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KUALA LUMPUR: Malaysia cannot afford another total lockdown as it will be “very detrimental” to the country’s economy, said Finance Minister Tengku Zafrul Tengku Abdul Aziz.
Speaking to CNA in an exclusive interview, he said that the current nationwide Movement Control Order (MCO) that has been enforced in all states except Sarawak through February 4 has made it more difficult to achieve the target growth forecast. between 6.5% and 7.5% this year.
“The (growth) projection we made was based on the assumption that there is no OLS,” he said on Wednesday (January 27).
“I must admit that now it will be a challenge (to meet the forecast). Probably in the lower range of 6.5 percent to 7.5 percent, depending on how long the MCO will be and how long it takes us to win against COVID-19. “
The 47-year-old minister added: “I think that we, as a country, cannot afford a total blockade of economic sectors. The long-term impact, the economic scars will be very damaging. “
He prefers a more specific approach, with authorities tightening the screws in the labor-intensive sectors that have contributed to the increase in cases.
The more automated sectors such as pharmaceuticals, aeronautics and automobiles should be able to operate normally, subject to standard operating procedures, he said.
READ: COVID-19 – Malaysian business owners and trade groups urge against another total lockdown
When Malaysia first joined the MCO last year, almost all economic activities ceased, except for essential services such as food and beverage outlets and pharmacies.
The lockdown caused the country to reduce its COVID-19 cases to single digits in the first half of 2020.
Instead, this current MCO, called “MCO 2.0”, has allowed more economic sectors to continue operating, such as the automotive and retailers such as gold and jewelry stores.
With Malaysia posting a four-digit increase in daily cases despite the current OLS, talks about a return to a strict lockdown abounded.
The speculation was fueled by a leaked letter from the EU-Malaysia Chambers of Commerce and Industry (EUROCHAM) to its members, stating that the Perikatan Nasional government was ready to announce a full economic shutdown after February 4, if the number of COVID-19 cases did not show any improvement.
EUROCHAM immediately clarified in a press release last Sunday that no immediate shutdown was mentioned after the indicated date during its discussion with the Ministry of International Trade and Industry on January 22.
READ: Comment: Frustrated With Tighter COVID-19 Restrictions, Johor Residents Hope This MCO Is Their Last
THE IMPACT OF OLS 2.0 LESS SEVERE COMPARED TO LAST YEAR’S BLOCKADE
Tengku Zafrul, former CEO of Malaysia’s second-largest banking group CIMB, was quick to point out that MCO 2.0’s impact on the economy is less severe compared to the stricter MCO imposed in March last year.
“Probably half the workforce is working now, but 90 percent of the economy is still on the move. In terms of losses, the first MCO cost RM2.4 billion (US $ 592 million) per day, the loss is now RM700 million per day, so the impact is less, ”he said.
Higher commodity prices have now also given the government a bit more fiscal space to modify the budget projection for 2021, he added.
https://www.youtube.com/watch?v=F_9I-iho_F0
“The projection was based on various assumptions. It assumed an oil price of $ 42 a barrel. As you know, it is higher now. “
He explained that every US $ 1 increase in the price of crude oil per barrel will add RM300 million to the country’s income.
The minister released the country’s largest national budget in October worth around RM325 billion. With a fiscal deficit target capped at 5.4 percent of GDP and forecast for growth of 6.5 to 7.5 percent for 2021, some economists had called the projections too optimistic.
But he said it is still too early to review the figures, given the uncertainty about how long it will take to control COVID-19 that has infected around 200,000 in Malaysia and killed more than 700 so far.
A medical worker takes a COVID-19 sample from a man in Petaling Jaya, Malaysia, on January 18, 2021 (Photo: Reuters / Lim Huey Teng).
He was skeptical when asked whether the government is willing to consider widening the fiscal deficit beyond the 5.4 percent target to between 8 and 9 percent, as suggested by some opposition figures.
“We have a debt ceiling, a debt-to-GDP ratio of 60 percent. If it exceeds 60 percent, it needs the approval of parliament. Our debt service ratio is now over 30%. “
“The good thing is that we have enough liquidity in Malaysia. In fact, government loans are mostly in ringgit, and with regard to stimulus packages, we think that is enough. But in April and May, if we need more, we may spend more to jumpstart the economy and protect our people. “
READ: Malaysian merchants anticipated a sales boom ahead of Chinese New Year, but MCO has dashed their hopes
GST REINTRODUCTION SHOULD NOT BE DISCOUNTED
Prime Minister Muhyiddin Yassin, after coming to power last year, indicated that he wants to analyze the proposal to reintroduce the goods and services tax (GST).
Tengku Zafrul said that a committee was created a couple of months ago to seek to improve the flow of government revenue.
“We need to learn from the past also about how it was implemented, but at the same time understand the challenges we face today in the SST (Sales and Service Tax)… The moment will be key because we are in this pandemic and the economy is where it is today I think that imposing a new form of taxation is not the right time, “he said.
“But in the long term, I think we cannot rule out the possibility of reintroducing GST.”
The GST was first introduced in 2015 during the Najib Razak administration.
The 6 percent GST received a zero rate during the Pakatan Harapan government as part of the electoral promises to the people in 2018. Since then, it has been superseded by SST.
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