Malaysia’s economy may recover from extreme containment measures to stop the spread of Covid-19 in the third quarter before reaching its considerable potential in the fourth quarter, analysts said.

The expected rebound would be driven by the RM250 billion Prihatin stimulus measures, policy rate cuts by Bank Negara Malaysia, massive infrastructure spending and progress in public projects, they said.

They were commenting on Bank Negara’s forecast that the country’s 2020 gross domestic product (GDP) growth would be between -2.0 per cent and 0.5 per cent, down from the earlier projection of 3.2 per cent to 4.3 per cent.

Despite the potential in the second half of 2020. analysts agreed that the Covid-19 pandemic and subsequent containment measures by the government would adversely affect the local economy in the first six months, and ultimately drag the full-year GDP estimate to a contraction or the most, a small expansion.

Public Investment Bank Bhd Research (PublicInvest) expects the GDP to be at 0.3 per cent.

“Growth in 2020 will be supported in large part by the massive stimulus package worth RM250 billion (17 per cent of GDP) which is our largest in history, and one of the biggest in the region,” it said in a report today.

However, PublicInvest said this would be offset by the anticipated economic loss from the Covid-19, Mandatory Control Order (MCO) and commodity supply shocks.

“The growth forecast is still subject to changes given the still rapidly evolving Covid-19. Though the outlook is less-than-sanguine but economic activities are projected to recover in the second half (2H), driven at first by public-led initiatives to be followed by private-led initiatives which is usually the case during economic shocks.

“All in, we cautiously expect economic activities to accelerate and rebound in the 2H,” PublicInvest added.

AmBank Research said the first half of 2020 should witness negative growth due to weak global demand, supply chain disruption, travel restriction, the MCO, weak commodity prices and continued supply disruption in the commodity sector.

“But the economy is expected to improve in 2H, supported by fiscal and monetary measures,” AmResearch chief economist Anthony Dass said.

“Also, the ongoing improved engagement between policymakers and businesses should result in a faster implementation and better policy consistency,” Dass added.

Affin Hwang Capital’s GDP growth forecast is a contraction of -3.5 per cent. This is much lower than Bank Negara’s projection.

The main difference will be a sharply lower growth projection on domestic demand growth, which the firm projects at -4.0 per cent in 2020 (2019: 7.6 per cent), against Bank Negara’s 1.1 per cent.

“Our cautious view on the country’s domestic demand is partly due to the enforcement of the MCO from March 18 to April 14, whereby people’s movements are somewhat restricted, with restrictions of people exiting/leaving homes, closure of most businesses, and restrictions on entry of foreign tourists travelling into Malaysia,” Affin Hwang said.

The firm, however, said going into 2H of 2020, private consumption growth would not be normalised immediately as households might be impacted from possible shocks to their income and a slight erosion of purchasing power.

Households are also likely to be cautious on their spending due to the uncertain employment situation as well as affected by the expected slower growth in real disposable income.

“If Covid-19 prolongs, the possible shocks to household income and employment will weigh on consumer sentiment further, translating into weak consumer spending,” it said.

Affin Hwang expects Bank Negara to lower its Overnight Policy Rate (OPR) by another 25 basis points (bps) to 50 bps to 2.0-2.25 per cent, possibly in the next Monetary Policy Committee meeting on May 5 or even sooner.

This is due to the potential negative impact of the Covid-19 outbreak and the potential downside of low global oil prices on the domestic economy.

Bank Negara has already cut its OPR by a total of 50bps in its first two meetings of the year in January and March.

Source: NST

Businesses will need to review their business plans and reallocate their resources to optimise future returns after surviving the COVID-19 pandemic, said Baker Tilly Malaysia.

Global Business Solutions director, Loke Chee Kian said chief financial officers (CFOs), together with other C-Suite officers, should adopt transformative mindsets subsequent to the pandemic.

“To chart the business to the next level and to be ready for the new normal, new budgets need to be developed and set; a remote key performance index monitoring and managing system should be established; risk management systems should be revised and a business continuity plan should be developed,” he said in a statement today.

For all of the above to happen, Loke said, a business should first be armed with an efficient and effective information system, which is where digitalisation comes in.

“So, if your organisation is still managing information and data manually, it is time to consider a change,” he said.

Prior to the pandemic, the CFO’s goal is generally focused around financial growth, which is measured by the return on investments (ROI) for every ringgit invested.

“The higher the ROI generated, the better for the business as it means that the business is utilising its financial resources efficiently and effectively,” he said.

However, now the CFO is also tasked with answering the million-dollar question – how long will the business be able to survive?

“For a business to emerge from this crisis, the CFO plays a crucial role in ensuring the continuity and sustainability of the business,” he said.

In the immediate term, Loke said, the CFO will have to review the business’ cash flow position as well as devise a survival action plan for the business for at least six months.

A competent CFO should also be able to identify opportunities for the business amidst this crisis, he said.

However, he noted that the extent to which the CFO can contribute is dependent on the availability of an updated set of accounts, an efficient accounting system as well as a supportive finance team.

Baker Tilly is one of the largest accounting and business advisory firms in Malaysia, with 50 partners and directors, eight offices across Malaysia and an office in Phnom Penh, Cambodia, as well as over 800 professional staffs.

Source: Bernama

The International Trade and Industry Ministry (Miti) has bolstered its preparedness to ensure that the economy can be reopened with close collaboration between itself, the Health Ministry (MoH) and the National Security Council.

International Trade and Industry Minister Datuk Seri Azmin Ali said its preparedness in the fight against Covid-19 had also been shored up with the help of other ministries and agencies.

They included the Science, Technology and Innovation Ministry (Mosti), Domestic Trade and Consumer Affairs Ministry (KPDNHEP) and Malaysian Investment Development Authority (Mida).

“The cooperation between the MoH and Miti is important and so far it has been going well. Miti will refer to the MoH on every new decision we have to make,” Azmin told reporters after hosting a courtesy call by Media Prima Bhd group chairman Datuk Syed Hussian Aljunid and group managing director Datuk Iskandar Mizal Mahmood at his office here today.

Also present was The New Straits Times Press (Malaysia) Bhd interim chief executive officer Mustapha Kamil Mohd Janor, who is also Media Prima executive director of news and editorial operations.

Azmin said the ministry had activated its war room with less than 60 staff from various ministries and agencies to process applications to resume operations. This group of less than 60 staff work on a 24-hour basis.

He said because of the overwhelming number of applications, Mosti, KPDNHEP, Mida and other agencies were mobilised to assist Miti to verify applications and handle enquiries.

“As of today, 50,000 applications have been received from companies to operate during the third phase of the movement control order (MCO). There are more than 3,000 applications related to Mosti alone.

“We are working very hard to make sure all the applications are processed smoothly within the timeframe,” he said.

Azmin said in order to reduce the impact on the Malaysian economy, more industries should be allowed to operate during the MCO.

He, however, said the companies must be responsible for maintaining and undertaking the necessary health protective measures at all times to prevent the spread of the Covid-19 pandemic.

He said as Malaysians return to the workforce to restart the economy, the
incentives to resume operations were also subject to adhering to the guidelines set by the MoH and other agencies.

“The MoH has submitted comprehensive and strict SOPs (standard operating procedures) for all employers and companies to operate during this MCO.

“Failure of the companies to comply with the SOPs will result in immediate revocation of their approval to operate as well as legal action,” Azmin said.

Meanwhile, Mosti scientific officer Dr Malarvili Ramalingam said it was working closely with Miti to review all applications under its supervision.

“To date, Mosti has received about 341,000 applications,” she said, adding that serving as a frontliner for the economy had kept her motivated to continue serving the nation despite her own difficulties.

“We are working parents, we are taking the risk to come out and sacrifice our time with family to be here everyday to do our work. We are so grateful to be given the opportunity to serve the nation,” she said.

Source: NST

Affin Hwang Capital expects the upcoming Short-Term Economic Recovery Plan (ERP) to cushion the domestic economy from a sharp contraction.

It said the government had previously announced a RM266 billion Economic Stimulus Package (PRIHATIN) to provide short term relief of about three to six months of assistance to support the economy from the negative short-term impact of the Covid-19 crisis.

“However, the government guided that the ERP is needed to ensure growth in the domestic economy is sustainable over the short to medium term,” it said in a research note today.

According to the Department of Statistics (DOSM), Malaysia’s Leading Index (LI), which is used to anticipate the turning points in economic activity in the short term, declined sharply to 4.9% in March 2020.

It was its largest monthly fall since November 1991, as compared to a contraction of 0.8% in February 2020, said Affin Hwang Capital.

The DOSM also predicted that the country is heading into an economic recession in the next four to six months.

Therefore, it said the ERP is also expected to include some short-term stimulus to support the domestic economy.

Yesterday,
the Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz revealed that the Prime Minister Tan Sri Muhyiddin Yassin would unveil details of the ERP this month with further measures to support domestic economic activities for the period of June to December 2020.

The ERP is expected to focus on three main objectives — empower people, propel businesses and stimulate the economy, which are intended to capitalise on the opportunities arising from the Covid-19 crisis for the country’s future economic development.

Source: Bernama

The government’s stimulus packages and the short-term economic recovery plan have softened the impact of the COVID-19 pandemic and paved a path towards economic recovery, says Minister in the Prime Minister’s Department (Economy), Datuk Seri Mustapa Mohamed.

He said Malaysia is fortunate to have a very diversified economy that does not depend on just one or two sectors.

“In terms of policy-making, there has been a lot of coordination between the major economic agencies, driven by Prime Minister Tan Sri Muhyiddin Yassin,” he said.

He was commenting at the World Bank Malaysia Economic Monitor June 2020, with a special topic on Surviving the Storm in facing the challenges brought by the COVID-19 and economic crisis.

“We welcome the findings and recommendations of the newly released World Bank Malaysia Economic Monitor as it provides a cogent analysis of the current economic challenges and will help inform our efforts to accelerate the post-COVID19 economic recovery process,” he said.

In terms of policy response, he said, Malaysia has been very quick, and has been implementing for the last three months three packageds by the current government and one from the previous government.

“With the implementation of these packages, we’re able to cushion the COVID-19 impact,” he said.

“Firstly we’re able to provide food for the people, no Malaysian family is unable to have access to food,

“Health has been a priority since day one, we have been very effective in preventing the pandemic, and we’re fortunate that the economy is diversified, and to have a robust manufacturing sector and services, which has always been strong, (while) agriculture is coming up, mining and construction, are doing ok,” he said.

The government responded to the economic impact of the pandemic with two rounds of the Prihatin Rakyat Economic Stimulus Package in February and March 2020, and more recently the Penjana Short-term Economic Recovery Plan.

On challenges in implementing the stimulus packages, Mustapa said the Ministry of Finance, under the Economic Stimulus Implementation and Coordination Unit Between National Agencies (LAKSANA), has been monitoring all sectors.

“So in terms of platform mechanism, it has been put in place, to make sure help reaches the ground, as that’s a big challenge,” he said, noting the government has been providing lots of cash transfers to help small and medium enterprises (SMEs) in the form of RM3,000 grants to micro-enterprises to restart their business.

The challenges include making sure the help goes to the ground and the incomplete data, said Mustapa.

He said it is important to have a robust database, noting the government’s present database on poverty and absolute poverty would be revised in an act, probably in a few months’ time.

Additionally, he said, there are probably about four million people involved in the informal sector but they are not registered with the Companies Commission or the local authorities.

“Going forward, the government continues to listen to the ground, we have a lot of engagement, this is a key feature.

“From the fiscal point of view, the plan in general can be viewed from two
perspectives. One is the strategy for the next five to 10 years — we introduced the Shared Prosperity Vision in October 2019 with three main objectives, we want Malaysians to enjoy a decent standard of living.

“Secondly, we want to close the gaps — development for all — and finally, we want to achieve a united, prosperous nation.

“Meanwhile, many Malaysians don’t have social protection, as the pandemic has brought challenges as many Malaysians, especially those in the informal sector — the fishermen, the farmers, petty traders — and they’re a big group of people, and going forward the number, is expected to increase,” he said.

He said there has been a rise in the gig economy, e-hailing and those involved in the food business, and the goal of social protection is to increase the coverage of Malaysians who contribute to various schemes including the Employees Provident Fund (EPF), adding that the biggest challenge would be the 50 per cent of Malaysians who do not contribute towards the EPF.

However, Mutapa said, coordination is very important, as policies should support COVID-19 recovery efforts and the development of an enhanced social protection system.

Meanwhile, the World Bank has suggested some short-, medium- and long-term policy recommendations in the area of publicly financed social assistance and contributory social insurance that should support COVID-19 recovery efforts and the development of an enhanced social protection system.

Short-and medium-term policies for publicly financed social assistance include continuing to provide COVID-19 emergency cash transfers until the incomes of the B40 group recover; deepening social assistance by using Bantuan Sara Hidup Rakyat /Bantuan Rakyat 1 Malaysia as a platform for human capital accumulation and productive welfare; reducinng exclusion error through proactive outreach/enrolment; and replacing non-targeted fuel subsidies with a targeted allowance.

Additionally, the World Bank suggested improving the delivery of social protection programmes, by moving towards a more standardised and commonly implemented targeting system; achieving deeper integration or interoperability of information systems; consolidating front-end service delivery; and updating benchmarks for monetary and non-monetary deprivation.

For publicly financed social assistance long-term policies, the World Bank
suggested the government formulate a social protection masterplan based on a functional review of the social protection system by strengthening core social assistance programmes in line with fiscal space; promote productive employment and the capacity of social/care workers; and address the increasing demand for non-cash support services, especially for older persons.

Additionally, it recommended that the government reverse the downward trend in government revenues by increasing the progressivity of the personal income tax framework; expand the capital gains tax; restrict items that are sales and service tax zero-rated or exempted; and focus on the use of tax incentives.

Meanwhile, short- and medium-term policies for contributory social insurance include strengthening the coverage of old-age income protection by broadening the scope of contributions to cover the self-employed, possibly with auto-enrollment and an option to opt-out and work with aggregators, like gig economy platforms.

Moreover, the World Bank recommended that the government strengthen the adequacy of old-age income protection by gradually increasing the minimum withdrawal age for EPF Account 1 balances to 65; convert contributions to EPF Account 2 to retirement savings; mandate a phased withdrawal for EPF balances; and improve social assistance for older persons through a modest, broadly targeted social pension.

For long-term policies, it suggested the government further strengthen the coverage and adequacy of old-age income protection by unifying registration requirements and contribution collection for the EPF, Social Security Organisation, and Human Resources Development Fund; further increase the EPF minimum withdrawal age with increased life expectancy; consider lowering EPF contribution rates and capping covered wages subject to mandatory contributions; offer age-based portfolios, longevity insurance, and annuitisation options; and further improve social assistance for older persons through higher coverage or adequacy of social pensions in line with fiscal space.

Source: Bernama