Economy showing signs of recovery

graphic by MZUKRI

THE economy has progressively shown signs of recovery, following the gradual reopening of nearly all economic activities in May and June, Deputy Finance Minister II Mohd Shahar Abdullah said.

He told the Dewan Negara yesterday that month-on-month contraction of the country’s GDP has been narrowing since April.

“We can observe that GDP contracted 28.6% in April to 19.5% in May and an even smaller contraction of 3.2% in June,” Mohd Shahar said.

He said the recovery path is in line with the reopening of the economic sector in May and the upward performance is expected to continue into the second half of 2020.

“The economic indicators for July shows that the economy is in a good recovery phase,” he said.

These include the year-on-year growth of 3.1% in exports, 27% growth in passenger vehicle sales, 44.8% growth in commercial vehicles and a 7.4% increase in cars on tolled roads.

He added that domestic passenger traffic also grew 215.8% over the same period.

Mohd Shahar was responding to a question by Senator Husain Awang on the efforts taken by the government to increase the GDP growth by the fourth quarter of this year.

Earlier, he said the government’s direct debt amounted to RM854 billion as of June, or 57.7% of GDP. The country’s debt position stood at 53.6% under the statutory limit of 55%.

Putrajaya has sought to raise Malaysia’s debt to GDP ratio to 60% from the current statutory limit in the Temporary Measures Bill on Covid-19 passed in the Dewan Rakyat last month. The bill is expected to be passed in the Dewan Negara later this month.

Once it becomes law, the legislation is deemed to have come into operation on Feb 27, 2020, and will remain effective until Dec 31, 2022.

Two existing laws, which currently set the debt ceiling at 55% of GDP, will be suspended throughout the period.

Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz had previously said that the government’s overall debt and liabilities stood at RM1.2 trillion, of which direct debt stood at RM854 billion.

However, he said that it did not mean that the government is bankrupt.

In 2017, the government’s debt stood at RM686.8 billion and later increased to RM741 billion in 2018.

It further rose in 2019 to RM793 billion. His statement had verified claims made by the previous government that the country’s debts and liabilities amounted to over RM1 trillion.