ECONOMIC RECOVERY PLAN TO PUSH FOR TECHNOLOGY, LABOUR MARKET REFORMS, ATTRACTIVE INVESTMENT ECOSYSTEMS

KUALA LUMPUR, Aug 13 -- RAM Rating Services Bhd expects Malaysia’s medium-to-long-term economic recovery plan, to be unveiled in October, will incorporate a reform agenda to push developments in technology, labour market reforms and the promotion of attractive investment ecosystems for sustainable growth.

In a statement, the rating agency said the most damaging aspect of the COVID-19 pandemic has been the sudden job losses, disproportionate particularly among the lower-income groups.  

“In the next few months, employment prospects and private consumption growth will depend much on the ability of the non-essential and export-oriented sectors to rebound and improve their capacity slack.

“This is crucial as the various COVID-19 incentives and support schemes approach expiry in the fourth quarter of this year,” it said.

To date, policy responses have been timely and supportive, e.g. the recent tweaking of the bank loan moratorium.

It said with the current deflationary environment and a substantially lower risk of disruptive fund outflows, there is ample room for Bank Negara Malaysia to further ease monetary policy, if necessary.

RAM Ratings maintained its stance that the overnight policy rate would likely to be cut again by 25 basis points to 1.50 per cent before the end of this year.

Commenting on the gross domestic product (GDP), the rating agency said Malaysia is set to experience one of its worst recessions this year, with a projected GDP contraction of 4.0 per cent, exceeding RAM Ratings’ initial projection of -2.4 per cent, mainly due to greater-than-expected industrial and labour market slack.

It said the various stages of the movement control order (MCO) endured by businesses and households have crushed demands.

Although estimated capacity utilisation of most essential industries has sustained at normal levels, it said export-oriented sectors have underperformed, plagued by synchronised supply and demand challenges.

“Meanwhile, the non-essential sectors are still operating below normal capacity. With social distancing operating guidelines still in place, their recovery momentum appears lethargic.

“Any broad-based recovery is therefore unlikely this year, although some improvement is anticipated in the second half of this year,” it added.

-- BERNAMA