VACCINATION, ABILITY TO ADDRESS PANDEMIC KEY TO ECONOMIC RESET - ECONOMISTS

By Nurunnasihah Ahmad Rashid and Nurul Jannah Kamaruddin

KUALA LUMPUR, Nov 13  -- Malaysia’s smaller gross domestic product (GDP) contraction in the September quarter rhymes with the reopening of its economy following the lower COVID-19 infection rate.

Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said the country’s GDP of 2.7 per cent for the third quarter of 2020 was better than the expected outturn.

“Consumer spending which is the main anchor of the Malaysian economy declined by a smaller margin compared with the previous period while net exports jumped 21.9 per cent as the global economy gains further traction,” he told Bernama.

Going forward, he said the outlook for the economy hinges heavily on the COVID-19 situation.

“The eventual discovery of vaccine would certainly pave the way for a convincing recovery as the economy would be able to fully function.

“The policy supports coming from the fiscal and monetary authorities are also massive which should translate into strong recovery,” he added.

However, he said, the situation remains fluid in various parts of the world especially Europe, in light of the recent lockdown measures. 

“Domestically, the conditional movement control order implemented in many states would mean the recovery momentum could in some way be affected.

“But overall, it’s a good start for boosting confidence as talks of vaccine discovery is gaining more steam of late, while the sizeable Budget 2021 allocation should also be able to facilitate the recovery,” he said.

Meanwhile, Institute for Democracy and Economic Affairs Malaysia research manager Lau Zheng Zhou said vaccination undeniably will be key to resetting the global economy and for growth to resume.

“However, it is still early to comment on the effectiveness of the COVID-19 vaccine and the long lead time that it will take to mass-produce and deliver to the population means that we are still at least one and a half years away before vaccination can be administered.

“But at the same time, businesses and workers cannot wait and so the world will continue to learn how to adapt to the new normal and Malaysia should be focusing on doing that as well,” he said.

Hence, Lau said the government should produce policy documents to guide Malaysia's mid-to-long term growth in a way that offers something new and inspiring.

“If we want to talk about whether the economy will be recovering for the next 12-24 months, I think the most crucial factor will still be the ability for Malaysia and also the world to address the pandemic situation.

“Malaysia as an export-oriented economy relies heavily on the stability and vigour of the global environment, and our ability to register a strong rebound will depend on how prepared we are to take advantage of opportunities when global growth resumes,” he said.

This meant that the country, he added, has to flatten the COVID-19 infection curve soon, so as to avoid putting the economy under a lock down.

Former executive director of Malaysian Institute of Economic Research, Dr Zakariah Abdul Rashid believes Malaysia’s 2021 GDP will be lower than that in 2019.

To realise the -4.5 per cent growth targeted for 2020, he said the economy in Q4 must grow more than 14.6 per cent.

"Note that during Q3, we started to reopen the economy while in Q4 we started to reclose the economy (on account of the CMCO)," he said. 

The Finance Minister expects 2021's GDP to expand between 6.5 per cent and 7.5 per cent, after a 4.5 per cent contraction this year amid COVID-19. In 2019, the economy grew at 4.3 per cent.

The treasury’s GDP forecast is within the range of Bank Negara Malaysia’s (BNM) 5.5 per cent and eight per cent for 2021. For 2020, BNM estimated it to be between -5.5 per cent and -3.5 per cent.

-- BERNAMA