World Bank reviews impact of Covid-19 before revising GDP target

The outbreak will have an effect on 4 aspects in the country’s economic situation, namely tourism, FDI, supply chains and commodity prices

by ASILA JALIL/ pic by HUSSEIN SHAHARUDDIN

THE World Bank is studying the impact of the Covid-19 outbreak on Malaysia’s economy before it decides whether to revise the country’s GDP target this year.

Its country manager for Global Knowledge and Research Hub Dr Firas Raad (picture) said the bank has yet to decide on a new figure due to the uncertainty of the outbreak.

“It is an evolving situation with a number of assumptions, so we have not yet made any decision on when we are going to put out a new number.

“It is natural to think a revision will be happening, but as to when it will (happen), we still do not know,” Raad said.

“I think everybody is looking at the impacts and the channels through which that impact will flow,” he told reporters after the World Bank’s report launch on innovation policy in Kuala Lumpur yesterday.

Raad also said the outbreak will have an effect on four aspects in the country’s economic situation, namely tourism, foreign direct investment (FDI), the supply chains where Malaysia is a part of and commodity prices.

He said disruption in supply chains will be present in the business operations involving small and medium enterprises as a significant amount of trades takes place between Malaysia and China.

Impacts of the outbreak towards the country are bound to happen as China is one of the country’s biggest trading partners, but the World Bank is still in the middle of examining the magnitude it will have on Malaysia, said Raad.

“If Malaysia is integrated into this supply chain with China and even other countries, there will be an effect.

“Also, with the possible reduction in demand for Malaysia’s commodities, whether its palm oil or gas, it could also have an effect,” he added.

In December last year, the World Bank revised down Malaysia’s GDP target for 2020 to 4.5% from its initial figure of 4.6% due to weaker than anticipated investment and export growth in the third quarter.

On the fiscal stimulus package to be announced next week, Raad said the government will have to be selective and strategic for the industry that has suffered from the outbreak.

“It is in a difficult position because we do not know where we are in this crisis, whether has it peaked or not, whether it (Malaysia) does one round of stimulus now and then come back and do other rounds. We will have to calibrate how much support it provides,” he added.

Meanwhile, touching on the report that was launched yesterday, Raad said the World Bank views that the idea of promoting an innovative ecosystem is crucial in supporting Malaysia’s transition into becoming a high-income and developed nation.

He said without innovation-driven activities supported by good education reforms, it would be difficult to get the productivity gains needed by the country’s economic system to move forward.

“Malaysia has come a long way in its journey from basic agriculture to advanced agriculture, and basic manufacturing to advanced manufacturing.

“It has made a lot of gains to go to the next step where you have an economy that is driven by innovative activities and knowledge-based activities, then you need the right ecosystem,” he added.