PETALING JAYA: The Finance Ministry (MoF) says Malaysia’s economic recovery prospects in the near term appear more favourable with the reopening of various economic sectors and timely implementation of stimulus packages.
Following this year’s second Fiscal Policy Committee (FPC) meeting yesterday, the ministry noted the improvements in several economic indicators such as a rebound in gross domestic product growth and a recovery in the labour market.
Manufacturing sales have improved in July and external trade has expanded in August.
Meanwhile, the improvement in the Leading Index in July indicates a gradual economic recovery in the near-term and improved economic prospects by 2022, according to the ministry.
“As a small and open economy, Malaysia’s recovery is highly dependent on the global economic recovery, particularly that of our major trading partners.
“As such, Malaysia’s 2022 growth is expected to rebound in line with the recovery in the global economy and trade throughout the second half of 2021 and next year, particularly as more countries step up their vaccination efforts.
“Furthermore, the continued implementation of economic and fiscal stimulus measures will also support Malaysia’s economic growth, which is expected to remain strong at 6% and 5.8% according to the International Monetary Fund and the World Bank, respectively,” it said in a statement.
Yesterday, the FPC meeting was chaired by Prime Minister Datuk Seri Ismail Sabri Yaakob.
The committee members include the Finance Minister, Minister in the Prime Minister’s Department (Economy), the chief secretary to the government, the secretary-general of the Treasury, the director-general of the Economic Planning Unit and Bank Negara governor.
Looking ahead, the Finance Ministry said the immediate priority is to restore the country’s potential growth capacity to allow communities and businesses to adjust to new norms.
Another key priority is to invest for future growth and better job opportunities.
Given the need for spending flexibility, the government will table a motion during the current Parliamentary sitting to raise its statutory debt limit from 60% to 65% of gross domestic product (GDP).
Nevertheless, the Finance Ministry said the government remains committed to fiscal consolidation in the medium term as outlined in the 12th Malaysia Plan (12MP), with a deficit target of 3.5% of GDP by 2025.
“To achieve this, the committee also deliberated on the application of a variety of fiscal tools to balance the government’s spending needs with fiscal sustainability.
“These measures include improving revenue collection, enhancing spending efficiency and managing debt more prudently.
“To achieve long-term macroeconomic and fiscal stability, the FPC agreed that medium-term fiscal consolidation will have to be more robust than previously planned, while keeping pace with expected economic recovery,” it said.
Moving forward, the MoF said the government is committed to assist all Malaysians to pursue a safe and systematic exit from the crisis and foster a sustainable recovery under the upcoming Budget 2022.