KUALA LUMPUR – The government’s financial standing remains strong and has been used to good effect to cushion the Covid-19 shock, said Finance Minister Datuk Seri Tengku Zafrul Tengku Abdul Aziz.
He said Fitch Ratings, in its recent report, agreed that Malaysia’s deficit targets of 6.0% in 2020 and 5.4% this year are realistic and achievable.
“These are better than the International Monetary Fund’s (IMF) estimation of a 10.3% deficit that will be experienced by emerging market economies,” he said during the Bursa Malaysia Forum aired on Bernama TV (Astro 502) today.
The forum, themed Menang Bersama: Rebuilding Malaysia’s Economy Together, featured a question-and-answer session moderated by Bursa Malaysia Bhd chairman Tan Sri Wahid Omar.
Tengku Zafrul said the additional spending via economic stimulus packages in 2020 is a testament to the government’s priority when it comes to the people.
“So far, the stimulus packages have benefited 20 million individuals and 2.4 million businesses, with more than 50% of the initiatives delivered to date.
“Out of this, the bulk of disbursements include immediate relief measures such as the cash aid like Bantuan Prihatin Nasional, the Geran Khas Prihatin, wage subsidies and other measures to protect the rakyat’s livelihood and ensure the continuity of businesses,” he said in the programme.
Tengku Zafrul said these moves are expected to add up to four percentage points to growth in 2020.
In 2020, gross domestic product (GDP) is expected to contract between 3.5% and 5.5%.
The IMF recently revised Malaysia’s GDP contraction by 20 basis points – from 6.0% in October 2020 to 5.8% in late December.
Tengku Zafrul also said that the accumulated net foreign inflows of RM18.3 billion recorded by Malaysia’s bond market in 2020 reflects yield-hunting activities and, to some extent, represents the confidence of the capital market in the country’s policies and direction over the next few months.
The finance minister said that although Bank Negara Malaysia has cut the overnight policy rate (OPR) to a record low of 1.75%, there is room for the central bank to take action in terms of monetary policy.
“Central banks around the world cut their interest rates, and Malaysia is one of them. However, at the same time, foreign funds’ net selling of RM24.6 billion was recorded in the equity market for 2020; and to put it into context, it (equity exit) happened to all the countries when they entered into lockdown,” he said.
Tengku Zafrul further said that Malaysia, alongside other countries – including South Korea, Indonesia, Thailand and the Philippines – experienced a significant foreign outflow which, at the same time, imposed a downward pressure on the currency market.
On the country’s foreign direct investment (FDI), he said that the government is aware of the challenges and highly competitive landscape as Covid-19 pandemic disrupts supply chains globally, particularly in capturing the relocation of multinational companies (MNCs).
“One of the key factors in deciding where to invest is consistency of policies. Deciding to open and close factories and offices without clear guidelines will only damage investor confidence,” he added.
Hence, the government has introduced various tax and investment incentives under the National Economic Recovery Plan (Penjana) and Budget 2021, as well as measures to ensure seamless facilitation of investors such as the establishment of the Project Acceleration and Coordination Unit and various online platforms such as the i-Incentive.
“As a result of all these measures, investors’ confidence in Malaysia can be seen in terms of the approved investments during the first nine months of 2020, which stood at RM110 billion, 40% of which was FDI. These investments involved over 2,900 projects, with the creation of close to 65,000 jobs,” he added.
The Malaysian Investment Development Authority (Mida) announced that it has also identified 240 high-profile foreign investment projects with a combined potential investment value of nearly RM82 billion from various sectors, namely electrical and electronics, machinery and metal, life sciences and medical technology, chemical and advanced materials, transportation technology, and food technology and resource-based industries.
“These projects are anticipated to materialise this year, with about RM48 billion worth of potential investments into the country currently being evaluated. These projects, once approved, are expected to be implemented within 2021 to 2022,” he said. – Bernama, February 2, 2021
