ALREADY, WORLD BANK CHOPS DOWN MALAYSIA’S GDP FORECAST TO -0.1%: IT’S RECESSION – WHAT ELSE WITH BUNGLING MUHYIDDIN & CO IN CHARGE!

 PUTRAJAYA, 11 Mac -- Perdana Menteri Tan Sri Muhyiddin Yassin bergambar bersama jemaah menteri sebelum mesyuarat kabinet pertama kerajaan baharu di Bangunan Perdana Putra hari ini. --fotoBERNAMA (2020) HAK CIPTA TERPELIHARA PUTRAJAYA, March 11 -- Prime Minister Tan Sri Muhyiddin Yassin poses with a cabinet ministers before the first new cabinet meeting at the Perdana Putra today. --fotoBERNAMA (2020) COPYRIGHTS RESERVED

PETALING JAYA: The World Bank Group has significantly lowered its 2020 GDP growth projection for Malaysia to -0.1% from 4.5%, against the backdrop of growing uncertainty over the duration and overall impact of the Covid-19 outbreak.

“This marked reduction incorporates the slower growth momentum from the second half of 2019, but more significantly, it reflects the impact of the outbreak under a scenario where the current large-scale disruption of economic activities would extend for most of the year, before a partial recovery toward the year end,“ it said in the World Bank East Asia and Pacific Economic Update April 2020 “East Asia and Pacific in the time of Covid-19”.

“It is important to note that this estimate has a large degree of uncertainty, conditional on the rapid developments of the outbreak domestically and globally, and the subsequent policy responses,“ the World Bank added.

Net exports and investments are expected to experience a larger contraction in 2020, while private consumption is expected to grow at a much slower pace, from 7.6% in 2019 to 1.6% in 2020.

Government expenditure is expected to increase on various measures, including the economic stimulus package and other key expenditures and initiatives to mitigate the economic and health impact of the outbreak, but the bulk of stimulus activities are expected to be off-budget in nature.

As private consumption is projected to grow at only 1.6% (0.4% in per capita terms), the US$5.50 a day 2011 purchasing power parity poverty rate is projected to remain unchanged at 1.3% in 2020. More significant are the expected employment and income losses among the bottom 40% and even the middle 40%.

Effective economic relief for those affected will depend on both means-tested social assistance such as Bantuan Prihatin Nasional and the ongoing Bantuan Sara Hidup program and employment-based social insurance such as Employees Provident Fund and Employee Insurance System.

Meanwhile, it said the large degree of uncertainty over the outcome of the outbreak presents a major downside risk to the economy.

“An uncontained or further deterioration of the outbreak would result in more severe or prolonged restrictions on overall economic activities, posing a further drag on growth into 2021.

“Moreover, uncertainty over the country’s political stability following the recent change in the ruling coalition and the government’s ability to manage the outbreak could pose further downside risks to growth,” said World Bank.

The other major challenge is the limited fiscal policy space to respond to the crisis. While the recently announced stimulus package could help to mitigate the immediate impact of the outbreak, a deeper economic policy response would be needed should the health crisis deepen and result in a longer duration of economic disruption.

It said more targeted fiscal policy interventions would be needed to help mitigate the impact of the crisis on vulnerable households and businesses, as well as increase public health capacity.

This is further complicated by the plunge in commodity prices, which would put additional strain on fiscal space and in turn may increase the burden on monetary policy as a key policy tool.

THE SUN DAILY