IMF too optimistic about 2021 rebound, say two economists

 

Two economists say the pandemic has curtailed consumption and business income.

PETALING JAYA: Economists disagree with a forecast by the International Monetary Fund that Malaysia’s economy will rebound in 2021 with a 7.8% growth rate.

The IMF made the prediction in its latest Asia Pacific economic outlook report, after stating that Malaysia’s economy would likely shrink by 6% for the rest of this year, worse than the 3.8% contraction it had forecast in June.

Two local economists, though agreeing with IMF’s downward revision for this year, say that its 2021 projection was “too optimistic”.

Yeah Kim Leng, professor of economics at Sunway University said even a growth rate of 5-6% next year was only possible if Covid-19 is contained and borders reopened.

Yeah Kim Leng.

“Otherwise, the economy would not grow by more than 1% or 2%. A longer recovery period might be needed because of the uncertainty over Covid-19,” he said, citing the resurgence of Covid-19 cases.

Yeah added that the measures taken to contain the pandemic’s resurgent effect had curtailed consumption, reduced productivity and business income, and eroded consumer and business confidence, leading to lower spending and weaker recovery.

Carmelo Ferlito of the Centre for Market Education concurred with Yeah, saying any rebound would only happen if businesses, travel, and tourism were allowed again.

“I think we will observe rising unemployment and rising underemployment.

Carmelo Ferlito.

“I believe food and beverage, and tourism, will pay an even higher toll than what they already have but the harm will extend to manufacturing firms in particular in light of restrictions on hiring foreign workers,” he said.

Ferlito urged the government to allow businesses to operate as much as possible without confusing procedures that discouraged economic initiatives.

He also called for an Asean strategy on the reopening of international borders. - FMT