Malaysia’s economy to fully recover next year

Datuk Seri Mustapa Mohamed, The Minister in the Prime Minister’s Department (Economy) (pic), was reported by Bernama as saying that the government is currently focused on efforts to boost economic growth and restoring the country to the pre-Covid-19 state of affairs.

PETALING JAYA: Malaysia’s economy, which is currently experiencing a contraction caused by the Covid-19 pandemic, is expected to fully recover next year, according to Datuk Seri Mustapa Mohamed.

The Minister in the Prime Minister’s Department (Economy) was reported by Bernama as saying that the government is currently focused on efforts to boost economic growth and restoring the country to the pre-Covid-19 state of affairs.

“We know that the country is still dealing with the (Covid-19) health crisis. However, almost all economic sectors have reopened; the retail sector is improving while the tourism sector has yet to strengthen, ” Mustapa was quoted as saying by the local newswire.

“We hope the domestic tourism sector will expand in the next one or two months, ” he added.

Mustapa noted that the government had played a major role in dealing with the Covid-19 crisis, stabilising the situation and subsequently moving towards recovery.

He added that the government was not only focusing on economic recovery efforts, but it was also planning for economic growth.

“We had to deal with a serious economic crisis in the first quarter of 2020, with economic growth at only 0.7%, and this will contract even further in the second quarter.

“As such, the government has announced three economic stimulus packages totalling RM295bil and it is a huge amount that has never been spent in handling such a crisis before, ” he said.

Mustapa said the banking institutions also contributed to the economic stimulus packages, stressing that the banking system had played a major role in helping the government.

Meanwhile, RHB Research in a report yesterday said it expects to see a gradual economic recovery for Malaysia in the second half of the year.

The brokerage projected the second-half gross domestic product (GDP) to contract by 0.6%, which would be an improvement from the contraction of 7.4% it had projected for the first-half of this year.

“After an abrupt stop in economic activity in the second quarter, real GDP growth for the country is projected to recover in the second-half under the new normal environment. However, the nature of the recovery will largely depend on the outcome of Covid-19’s spread, where a resurgence of new cases is likely, but should be generally manageable, in our view, ” RHB Research said.

Overall, RHB Research has maintained its 2020 GDP forecast for the country at a contraction of 4%.

“Private consumption is expected to improve gradually in the second-half, based on ground checks by our analysts.

“However, conditions under the new normal could mean that economic activity will not likely return to the pre-pandemic pattern, ” it noted.

“However, investment is expected to remain sluggish for the second-half, amid lessened appetite for businesses in putting capital, at a time of uncertainty, ” it said.

Nevertheless, RHB Research expects public investment to gradually pick up pace in the second-half, especially towards projects with low gestation periods.

It said Bank Negara would likely stay pat with regards to the overnight policy rate, considering that the economic recovery was already underway.

“Any support ahead is likely to be more targeted instead of wide-ranging, ” it said.

RHB Research expects the ringgit to trade at 4.35 against the US dollar by the end of 2020.

“The weakness in the local currency could still be present, as the global economic recovery is likely to be moderate, ” it explained.