KUALA LUMPUR – Without a doubt, Malaysia faced one of its most economically challenging years in 2020, which derailed its growth trajectory and brought numerous hardships to the people.
The government, however, persevered, doing its best to strike a balance between containing Covid-19 and ensuring economic sustainability.
Never before has the nation seen its economy slow down to its lowest level at an expected -5.8% this year, by World Bank estimates, its weakest since 2009.
But the Statistics Department indicated last week that signs of a recovery may occur in early 2021 based on initial indicators, such as export performance and consumer spending habits.
Economists said after a tumultuous 2020, Malaysia’s economy is still expected to be volatile next year due to the still-raging pandemic and weak but recovering consumer sentiment.
Sunway University Business School economics Prof Yeah Kim Leng told The Vibes that the first half of next year will continue to be uncertain due to the emergence of new strains of Covid-19 wreaking havoc in Europe, such as in the United Kingdom and France.
“Our economic performance next year hinges on how well we are able to contain the pandemic, as well as depends on the efficacy of the vaccines.
“For now, the first half of next year looks uncertain, but countries worldwide should go ahead with their aggressive fiscal monetary measures.”
He said nations should put recovery initiatives in place because the economic revival will already be well in motion by the second half of 2021.
Meanwhile, economist Nur Ain Shahrier said the economic outlook for Malaysia next year is highly dependent on the political situation.
“While the Finance Ministry portrayed an optimistic forecast of economic rebound of between 6.5% and 7.5% next year due to strong economic fundamentals and a diversified economy, such sentiment is not shared by the Fitch Ratings agency, which has downgraded Malaysia’s sovereign credit rating from A- to BBB+.”
She added that the political situation in Malaysia will determine the speed of recovery, and that it is almost impossible to restore confidence in the country without a clear and transparent direction in policymaking.
“As a result, any mitigating actions that the government has put in place will not yield the expected results.”
For example, the extension of the loan moratorium provides a temporary buffer for borrowers, but those who are affected are still unable to secure jobs in line with their skills and experience to be financially secure again.
“Overall, there are so many uncertainties moving into 2021, and how soon we recover and how deep our recovery is depends on the political situation in the country,” said Nur Ain.
However, not all is gloomy with their projections.
Datuk John Antony Xavier said the economy is expected to rebound next year, riding on pent-up demand as well as the possible end of Covid-19.
“With the lifting of the conditional movement control order and the discovery of a vaccine, we can witness an increase in economic activity, which will reflate the economy and boost incomes and jobs.”
The economy would be invigorated by activities long held off by Malaysians, as well as the rejuvenation of various activities, which include tourism and other recreational activities, in line with the International Monetary Fund’s prediction that Malaysia’s economy is set to grow by as much as 9% next year.
“Domestic tourism will also recover and boost the growth of the tourism industry. Consumer demand will also shoot up, given the pent-up demand built during the movement restrictions,” said Xavier, a professor at Universiti Putra Malaysia’s Business School.
He added that Budget 2021 will boost public investment when implemented next year, as well as spur domestic spending and bolster economic growth.
“Building an ecosystem that aids recovery is a must. This will include upgrading broadband and infrastructure development.”
He concluded that regulations should be reviewed to aid the ease of doing business, and small and medium enterprises should be in a better position to get into e-commerce given the generous incentives to do so.
It has been a tough and exhausting year indeed, and the government has concocted every recipe there is to cushion the blow, as well as rejuvenate domestic demand among the people, via a slew of stimulus packages and incentives.
But the fact of the matter is that the economic outlook remains uncertain unless the country and its people pull themselves together to remain resilient, and act to reinvigorate domestic consumption and propel the economy out of its doldrums. – The Vibes, December 31, 2020
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