Malaysia’s economic performance doesn’t depend only on Covid-19, MCO impact: MARC research head - MIDA | Malaysian Investment Development Authority
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Malaysia’s economic performance doesn’t depend only on Covid-19, MCO impact: MARC research head

Malaysia’s economic performance doesn’t depend only on Covid-19, MCO impact: MARC research head

19 May 2021

Malaysia’s economic performance depends largely on internal and external factors, and not only on how the Covid-19 pandemic and the movement control order (MCO) play out, according to Malaysian Rating Corp Bhd (MARC) head of economic research Firdaos Rosli.

He noted that there have been narratives by economists and opinion makers that the country’s economy is dependent on the MCO, given its impact on business activities and the economy in general.

“However, it is not really dependent on the pandemic per se as all economic sectors are open, even with the MCO in place, Firdaos said in his presentation on ‘Economic Report & Capital Market Outlook 2021’ at the MARC Malaysian Bond and Sukuk Conference 2021 today.

 “What we are seeing is that economic activities are running as usual, and that will give some rebound compared to what it was in the previous year,” he said.

Externally, Firdaos said, the performance of Malaysia’s economy is linked to its major export markets. Major trade partners such as the US and the UK have ramped up their Covid-19 inoculation drive, which will translate into heightened demand for Malaysian exports, particularly for electrical & electronic and petroleum products.

The head of research noted that there has not been much communication on the government’s medium to long-term economic action plan as it is busy fighting the pandemic. He stressed the need for signals on policy, adding that the pandemic differs from the Asian and the global economic crises in the past, which were due to financial and trade factors.

“Interestingly, this crisis is non-financial and non-export led, which means that as we ‘squeeze the balloon’, the economy will still be in contraction mode.”

Firdaos explained that the country will see continued positive growth in the future as the government eases the restrictions.

Weighing in on foreign direct investments (FDI) in equities, he observed that foreign investors have left the market, but in the debt market there has been a healthy inflow since the start of the year. However, for manufacturing FDI, it is a completely different perspective altogether.

As far as incentives are concerned, Firdaos said what Malaysia has been offering are generic, whether it is pioneer status or tax perks, as there is nothing it can offer that its neighbours cannot.

To gain a competitive edge, he said, there has to be something “magical” that the government can offer to attract such investments.

Firdaos pointed out that the country can examine the trade agreements the country has participated in but has yet to ratify, such as the Comprehensive and Progressive Transpacific Partnership and the Regional Comprehensive Economic Partnership, to obtain such advantage.

“This would be one way to look at it. The other is the autonomous liberalisation route, similar to what we have done in the 1980s following the commodity crisis, where we liberalised foreign equity in manufacturing and allowed 100% equity to foreign manufacturers,” he said, adding that such a move will require in-depth policy justification.

Asked about the possibility of more stimulus measures, Firdaos offered his educated guess that they will be related to the social security net, particularly with regard to employment and the job market.

He said Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz had stated that the reason behind the government’s decision to keep the economy open was primarily to address the unemployment rate.

“It is rightly so, in my view. Looking at the past, the unemployment rate following a crisis is responsible for projecting the country’s growth trajectory in the post-crisis era. If we are not able to contain the unemployment rate this time around, we would likely see slow growth in private consumption.

“However, I am not sure that more cash handout is the answer as people are likely turn it into savings anyway, but let’s just see what the government has in store,” Firdaos said.

Source: The Sun Daily