The World Bank has noted that Malaysia is coping better with the severe economic downturn compared to many other economies, despite the challenges brought on by the Covid-19 pandemic. This comes as the organisation estimates that 90% of the world’s economies will see a contraction in 2020, leading to the first increase in global extreme poverty since 1998.
According to the World Bank country director for Brunei, Malaysia, Philippines, and Thailand, Ndiamé Diop, Malaysia’s economy is supported by strong fundamentals, which softened the impact of the pandemic. These include a diversified economic structure, sound financial system, effective public health response, and proactive macroeconomic policy support. This was also mentioned in the World Bank’s latest Malaysia Economic Monitor (June 2020).
“While we expect the economy to see a sharp contraction this year with gross domestic product shrinking by 3.1% and a particularly pronounced contraction in the second quarter, there is light at the end of the tunnel,” said Diop.
Diop also took note of the Malaysian government’s six-stage strategy to restart the country’s economy: resolve, resilience, restart, recovery, revitalise, and reform – in which the nation is currently in the fourth phase. “This means the government is set on not just getting out of this crisis, it is also trying to get into a better shape than it was before, so it is more able to withstand the next one,” he commented.
That said, Diop remarked that the government needs to do more for those who are most in need in the post-MCO climate, particularly vulnerable households and businesses. This is because some industries may recover faster than others. For instance, the manufacturing industry is expected recover faster compared to the tourism industry, which consequently affects the revival of incomes and jobs.
“This may mean providing further rounds of financial assistance to the vulnerable, especially the B40 who lack the savings and support networks to withstand a prolonged hit to their earnings,” said Diop. He also added that this crisis underscored the necessity of providing a stronger, more cost-effective, and less fragmented social protection system to improve the public’s welfare.
Additionally, Diop noted that Malaysia will need to introduce reforms to boost tax revenues, as well as find new and progressive sources of revenue as the economy recovers. This is because the Covid-19 pandemic has caught Malaysia ill-prepared with limited budgetary space to respond with direct fiscal injections.
Other key issues that Diop highlighted include upskilling and retraining the workforce for a new economy, as well as accelerating the digital agenda and bridging the digital divide. He further said that now is the right time to carefully design and implement policies in relevant areas so that Malaysia can achieve its aspirations to become a high-income economy.
Ndiamé Diop was appointed as the World Bank country director for Brunei, Malaysia, Philippines, and Thailand on 1 July 2020. You can read Diop’s full statement here.
(Source: Malay Mail)