24 Jun - 2 min read
The World Bank has said that the Malaysian government needs to give continued financial support to the poor, as it predicts that the Covid-19 pandemic will drag recovery. It also suggested that Putrajaya raise its statutory debt limit to spend more to help the vulnerable.
The bank explained that the recent runaway resurgence of Covid-19 cases and a slower-than-expected rollout of vaccines will likely hinder the country’s economic rebound. “The continuous cycle of ‘on-and-off’ closures and reopenings will have negative spillovers on the economy,” said the World Bank in its Economic Monitor (Malaysia) June edition report.
“In addition, the number of vulnerable households is likely to increase. A slower-than-expected rollout of the vaccination programme or further increases in case numbers and death rates would further exacerbate this situation,” the bank continued.
As such, the bank said, it is necessary to create additional fiscal space to strengthen the health system and provide additional financial support for the vulnerable groups. “Given this, it may be necessary to revisit the debt limit soon,” the World Bank said. “In the current context, fiscal policy should prioritise the welfare of the people over medium-term fiscal consolidation.”
Prime Minister Tan Sri Muhyiddin Yassin had unveiled over RM350 billion in relief and stimulus packages to date, but only RM75 billion of this aid was in the form of direct fiscal injection. Economists and businesses have said that this is inadequate to keep the economy from tanking and pushing low-income families into destitution.
The World Bank expects Malaysia to register a slower growth of 4.5% in 2021, 1.5% lower than the bank’s initial forecast. It said that the revision reflected the slower pathway towards the suppression of the pandemic and the progress of the vaccination programme.
“The current slow pace of Malaysia’s vaccine rollout and any further delay could also affect a more certain reopening of the economy and the ongoing domestic political uncertainty could continue to hinder the progress of the recovery effort in the near term,” the bank predicted.
(Source: Malay Mail)
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