PETALING JAYA: With some of the economic indicators showing signs of distress coupled with the movement control order (MCO) extension, economists are not discounting another round of stimulus package post-coronavirus (Covid-19) pandemic.
They said the package would be a targeted one which sets a timeframe and one which the government would have to re-prioritise its spending, especially in view of the global oil price crash and anticipated higher economic contraction.
Based on Bank Negara’s estimate, the economy is expected to be between a 2% contraction and 0.5% growth this year.
The World Bank too has lowered the country’s economic forecast with a 0.1% contraction of gross domestic product (GDP) and its lower case assumption of a 4.6% contraction due to the pandemic.
Since the Covid-19 outbreak, the government has announced stimulus packages amounting to RM260bil, with RM10bil of the total amount to be channelled to assist the affected small and medium enterprises (SMEs).
On the unemployment side, things are not looking favourable too. At the same time, exports also have been hit due to the virus outbreak.
The Malaysian Employers Federation (MEF) has warned that unemployment could reach up to two million this year, or a staggering unemployment rate of 13% – much higher than the central bank’s forecast rate of 4% or 629,000 people.
While not discounting the likelihood of a post Covid-19 stimulus package, Bank Islam chief economist Mohd Afzanizam Abdul Rashid told StarBiz that: “It really depends on how deep the recession will be after the pandemic.
“The existing measures are already big. It’s a question of how it will be deployed and reach its targeted group. In the event that the stimulus is insufficient, the government has the fiscal space to prescribe additional measures.
“The prevailing condition is unprecedented. Some are saying it could be worse than the Global Financial Crisis in 2009 and even the Great Depression in the 1930s. If that is the case, obviously the scale of economic stimulus has to be very big. But it has to be targeted and time bound.”
He is projecting a contraction of GDP by 1.9% in the first quarter and a full year contraction by 1.5%.
For unemployment, Afzanizam said his forecast is 3.8% to 4% as a base case. Last year unemployment stood at 3.3%. The IMF is projecting a much higher figure of 4.9% for Malaysia.
OCBC Bank economist Wellian Wiranto(pic below) said there could be a further supplementary stimulus package in the coming month or two to help tide things over again.
“It is unlikely to be in a size comparable to what has been announced previously given fiscal constraints. Hence, it will have to be more targeted. A large part of it would depend on whether the MCO would be extended again to stamp out the Covid-19 outbreak. Going by some reports, this may be a distinct possibility.
“Moreover, even if there is no extension per se, the opening up of the economy may only be coming in a gradual way, given the obvious fear about another unfortunate resurgence.
“On top of that, for factories geared towards exports, there is the big uneasy question as to whether its stock of raw materials and intermediate goods are enough to kickstart production again, and perhaps the bigger, even more uneasy question of whether the end-demand is there given the state of the global economy now, ” he noted.
Wellian is projecting the GDP growth to be in the region of minus 2.5% to a growth of 1.5% for this year.
The MCO has been extended to May 12 since it was first enforced on March 18.
The consideration for an additional stimulus package post Covid-19, said Socio-Economic Research Centre executive director Lee Heng Guie would depend on the process of growth stabilisation and recovery as well as how lasting the impact of the pandemic would be.
It must be mindful that it takes at least six to 12 months from the containment, stabilisation and recovery, he said.
“Let’s get the RM260bil package quickly implemented and disbursed so that households and businesses will be partially mitigated from severe economic and financial ramifications.
“We believe that the government will continue to review and assess as well as enhance the economic stabilisation measures, taking into account the evolving developments and will make the necessary adjustments to ensure an economic revival and business sustainability post Covid-19, ” Lee said.
Meanwhile, AmBank Group chief economist Anthony Dass(pic below) said that as opposed to focusing on a third stimulus package, what is more important now is to have strategies in revitalising the economy in the short term, medium and long term.
A key focus is to determine how much has the government’s stimulus package policies policies cascade down reaching the businesses and people.
Focus on manufacturing is important given its strong forward and backward linkages to the economy in driving GDP, current account and employment, Dass said.
“The government should look at ways and means to further relax the MCO on business activities and address the operational issues experienced by manufacturers as a result of the MCO, ” he added.
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