Updated: Jul 9
The World Bank is confident of Malaysia's fiscal resilience to withstand the onslaught of the economic crisis caused by the COVID-19 pandemic.
World Bank Group lead economist Richard Record noted Malaysia's diversified economic structure. He commented that the country has a good balance between domestic and external demand, command in various sectors including manufacturing, services and commodities, a sound financial system and an effective public health response as well as proactive macroeconomic policy response to the crisis.
"I think there is a lot of evidence to suggest that Malaysia will ride out this storm better than many other economies around the world.
"That said, we do give a special focus on the vulnerable group in this report. We think one of the challenges that Malaysia has had is that the safety net covers a lot of people, but it doesn't provide an awful lot of protection to them, just when they need it from this type of economic shock," Record said at a virtual press conference today after the launch of World Bank's Malaysia Economic Monitor - 'Surviving the Storm' report.
As Malaysia aspires to become a developed high-income economy, Record said that it is important for the government to put in place a social protection framework which can protect vulnerable groups, especially the B40 group, from any kind of shocks, be it a pandemic or any economic crisis in the future.
"So in that sense, I suppose this crisis provides an opportunity [for the government] to think about some of these reforms that would help ensure Malaysia would be even more resilient in the future," he added.
Speaking at the same press conference, World Bank Malaysia country manager Firas Raad acknowledged that the current economic recession is one massive economic storm and Malaysia is not the only country facing it.
"We feel that Malaysia has what it takes to weather it all, to come out on the other side of the storm, and it can survive because of many different reasons; its diversified economic structure, its macroeconomic management, the strong financial system.
"So there are many factors to support this idea that Malaysia will survive the storm and recover economically," Raas explained.
Earlier, the World Bank projected Malaysia's economy to contract by 3.1% in 2020, due to a sharp slowdown in economic activity caused by the COVID-19 pandemic and lockdown measures to contain its spread.
However, the World Bank expects growth to resume in 2021 at 6.9% as the outbreak eases.
In the Malaysia Economic Monitor report released today, it highlighted that the crisis has underscored the need to better protect vulnerable individuals and households in Malaysia, during the recovery period and beyond.
Although the coverage of social assistance is high across all income groups, especially among the B20, the World Bank argued that social assistance programmes in Malaysia had so far only had a modest impact on poverty reduction and promoting productive employment.
"Alongside cash-based social assistance, Malaysia will need to address the increasing demand for non-cash support services, especially for the elderly.
"Coverage and adequacy of long-term savings arrangements need to be improved as in the short term, the COVID-19 crisis may increase the vulnerability of older persons while temporarily reducing their savings for retirement," the World Bank said.
Source: The Edge Markets