KUALA LUMPUR – All major sectors of the economy – except construction and tourism – are expected to see positive growth by the end of the year, in what will be a welcome boost to businesses hampered by the Covid-19 pandemic.
The Finance Ministry said this will be aided by the anticipated reopening of all economic and social sectors by the fourth quarter (4Q21), due to the commendable progress and effectiveness of the National Covid-19 Immunisation Programme.
It noted that to date, more than 60% of the adult population nationwide has been fully vaccinated, while the number is significantly higher in the Klang Valley at over 90%.
In a pre-Budget 2022 statement today, the ministry said this development is expected to drive positive sentiment among businesses and consumers.
The ministry said other factors expected to support Malaysia’s economic recovery include increased external demand from major trading partners and the recovery of commodity prices, transition to digitalisation, and implementation of infrastructure projects with high multiplier effects.
“Overall, all major sectors of the economy are expected to register positive growth in 2021 except for construction and tourism, as a result of the containment measures put in place to curb the spread of Covid-19.”
According to the ministry, considering the factors supporting the economic recovery this year, the trend is projected to continue well into 2022.
This projection is backed by the International Monetary Fund and World Bank’s forecast that the Malaysian economy is expected to expand by 6% and 5% respectively, a return to the pre-pandemic gross domestic product (GDP) growth trend.
This is despite Bank Negara announcing on August 13 a slightly lower, revised GDP for 2021, down to between 3% and 4%, as opposed to the initial projection of between 6% and 7.5% earlier this year.
The ministry said the revision was due to the implementation of more stringent containment measures to protect lives and ensure the health system is not crippled, including the introduction of MCO 3.0.
For 2022, the ministry said the services and manufacturing sectors are expected to continue driving growth, following normalisation of economic activities.
It added that the greater impetus in economic activity will also revive consumer sentiment, due to improved earning prospects.
“As a result, the labour market is expected to recover in 2022 albeit at a more modest level than the pre-pandemic period, in tandem with the reopening of the economic sectors following the achievement of herd immunity.”
However, the ministry said there are some downside risks to the growth prospects, including the emergence of new Covid-19 variants that could impinge on the health system’s capacity and compel the government to extend movement control measures.
On the government’s debt level, the ministry said as of June 2021, it had risen to 61.2% to the country’s GDP, with statutory debt standing at 56.8%, below the statutory limit of 60%.
However, to ensure adequate fiscal space in the face of the pandemic crisis, the ministry said there is a need to further increase the debt limit to provide additional fiscal space in strengthening the economy and ensuring sustainable recovery. – The Vibes, August 31, 2021
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