Malaysia’s economy is projected to grow by 4.5 percent in 2021 amid a dramatic resurgence of the COVID-19 virus beginning in mid-April 2021. This recent spike in infections is raising concerns about the overall capacity of Malaysia’s health system and the effects of the ongoing cycle of opening and closing the economy on households and firms, according to the World Bank Malaysia Economic Monitor: Weathering the Surge, launched today. This latest projection is lower than earlier forecasts of 6.0 percent growth, reflecting a slower pathway toward suppressing the pandemic and a slower-than-expected vaccine rollout.
According to the report, Malaysia’s immediate priority must focus on the efficient and sustained management of the ongoing pandemic and its effects on individuals, households, and firms. Protecting the lives and health of citizens – and thereby preventing further strains on the country’s health system – is vital to ensure a safe resumption of economic activities and a prevention of a more protracted economic downturn.
“The Special Committee on COVID-19 Vaccine Supply is putting all its resources toward achieving the country’s vaccination goal,” says Khairy Jamaluddin, Minister for Science, Technology and Innovation and Coordinating Minister for the Covid-19 National Immunisation Programme. “The panacea to break the painful tradeoff between lives and livelihoods is quite simply; vaccinations. Immunisation works.”
Despite the challenges posed by the pandemic, external economic conditions are improving – helping to facilitate an economic recovery in the country. Exports are expected to jump to 11.2 percent in 2021, a significant rebound from the -8.9 percent seen in 2020, as global demand stabilizes and investments in export-related activities continue to improve.
“While the government’s main focus now is on managing the pandemic, it will not let up in supporting the more medium-to-longer term priority of promoting the emergence of a resilient and sustainable private sector. A better understanding of the COVID19 shock in terms of its severity and distribution; and what adjustment mechanisms firms have adopted in the face of this shock, are necessary components in our recovery efforts,” said Datuk Seri Mustapa Mohamed, Minister in the Prime Minister’s Department (Economy).
“Such information will enable us to design better policies to help smooth the impact of the shock and support a recovery led by a more resilient private sector.”
Malaysia’s economic recovery hinges on policies to promote immediate relief and on clear, accessible and targeted support programs to enable firms to preserve liquidity. Recovery efforts should include the extension of conditional wage subsidies, improving the predictability of Standard Operating Procedure (SOP) regulations, and expediting approvals and disbursements for existing loans. In the medium and long term, however, deep and structural reforms will be required for a private-led post-pandemic economic recovery.
“Throughout the past year, the World Bank Group’s Inclusive Growth and Sustainable Finance Hub in Malaysia has worked closely with the Government to address and monitor the effects of the pandemic on the country’s economy. Real-time surveys have shown that Malaysian firms are more vulnerable than their regional peers and that the pandemic is exacerbating issues that the country’s private sector was already grappling with before the pandemic,” said Victoria Kwakwa, World Bank Vice President for the East Asia and Pacific Region. “As a post-pandemic recovery will largely be driven by the private sector, efforts should be made to enhance the resilience of this sector over the medium-to-long term.”