Govt spending needed to revive economy in light of Covid-19, says Tok Pa

  • Nation
  • Monday, 02 Nov 2020

KUALA LUMPUR: While the fiscal deficit may be a concern, an increase in government spending is needed to revive the economy in light of the impact of Covid-19, says Datuk Seri Mustapa Mohamed (pic).

“We need to spend and that is why the government is taking the approach of not looking too much at the fiscal deficit as what is often referred to as ‘fiscal space’.

“It is not that we are disregarding fiscal deficit but it is not as relevant in light of the current situation, ” the Minister in the Prime Minister's Department said when answering a question by Datuk Seri Saifuddin Nasution Ismail (PKR-Kulim Bandar Baru) in the Dewan Rakyat on Monday (Nov 2).

Mustapa added that this was necessary in light of the impact of the Covid-19 pandemic on the nation's economy, which had affected government revenue.

“We need a new approach that takes into account the current situation of the global economy and also a drastic drop in government revenue.

“To generate revenue, we need to spend, ” he argued.

Mustapa added that Covid-19 has greatly affected several sectors, particularly the tourism and aviation industries following the closure of borders around by nations to curb the spread of the virus.

He cited the closure of the border between Johor and Singapore as an example that affected the economy of Johor.

He also said that Johor Mentri Besar Datuk Hasni Mohammad has since submitted proposals to the National Security Council to help ease the situation.

Earlier, to a question by Datuk Mohd Fasiah Mohd Fakeh (Bersatu-Sabak Bernam), Mustapa said the third wave of Covid-19 is expected to have an impact on earlier economic forecasts.

“The economy is forecast to shrink by between 5.5% and 3.5% this year and is expected to grow between 5.5% to 8% next year.

“However, the growth forecast for October and November may be affected owing to the third wave which resulted in movement control orders in Selangor, Kuala Lumpur, Putrajaya and Sabah, ” he said.

On the whole, there was positive growth for the economic indicators for August and September compared with the first quarter of this year, he added.

He said that exports and sales of passenger cars grew by 13.6% and 8% in September while the total value of sundry and wholesale sectors grew by 2.5% in August.

In August, the Dewan Rakyat passed the Temporary Measures for Government Financing (Covid-19) Bill to allow the government to borrow up to 60% of the gross domestic product (GDP) in the effort to ease burdens experienced by the people and businesses.

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