KUALA LUMPUR: The World Bank is in the midst of reviewing the economic impact of the COVID-19 outbreak on Malaysia’s economy before deciding whether to revise the country’s gross domestic product (GDP) growth target.
In principle, the World Bank is looking at a GDP growth of 4.5% in 2020 for Malaysia.
Its Global Knowledge and Research Hub country manager (Malaysia), Dr Firas Raad said a revision was likely in light of the “evolving situation”.
“Everybody is still looking at the impact and flow channels,” he told reporters after the launch of the “Practitioner’s Guide to Innovation Policy” report yesterday (Feb 18).
According to him, the World Bank is currently studying the flow or transmission channels such as tourism, foreign direct investment (FDI), supply chain and commodity prices.
“Malaysia is a trading nation. As China is one of its biggest trading partners..there would certainly be an impact but its extent is still being examined,” he said.
Hopefully, Firas said, the economic stimulus package which is expected to be announced by the government next week, would also include various channels that the World Bank is looking at.
“Tourism is a big sector that should be looked at, to incentivise different activities as well as FDI,” he said.
However, he added, the government must be careful and be more selective and strategic in supporting industries that are suffering from the economic impact of the outbreak.
“It is a difficult situation as we do not know whether the epidemic has peaked or not,” Firas said.
Meanwhile, he said small and medium enterprises (SMEs), which constitute 98.5% of businesses in Malaysia and contribute up to 37% to the country’s GDP, are an important segment that needs government backup through different policy instruments.
Firas said the COVID-19 outbreak may affect the SMEs through the supply chain, due to its trade link with China.
“There could also be a possible reduction in demand in Malaysia’s commodities, either palm oil, crude oil or gas, that would affect the economy, though the magnitude is not yet ascertained,” he said.
Meanwhile, commenting on the report, he said the World Bank is of the view that the promotion of the innovation ecosystem is essential to support Malaysia’s transition in becoming a high-income and developed nation.
“Without innovation-driven activities, supported by good education reform, it is hard to get the productivity gains that the Malaysian economy needs.
“It is the next step forward as the country has come a long way in its economic reform journey from agriculture to advanced agriculture, and from basic manufacturing to advanced manufacturing,” noted Firas. – Feb 19, 2020, Bernama
