Malaysia’s ratings will be under pressure as govt debt continues to increase due to sluggish economic pace
by NUR HANANI AZMAN / graphic by MZUKRI MOHAMAD
MALAYSIA will not be able to achieve the 6.5%-7.5% economic growth target if the Conditional Movement Control Order (CMCO) continues, experts warned.
They proposed for the government to implement the Targeted Enhanced MCO (TEMCO) to ensure that economic activities will not be stalled.
University Malaysia of Computer Science and Engineering Adjunct Prof Dr Aimi Zulhazmi Abdul Rashid cautioned that Malaysia’s ratings will be under pressure to be downgraded as the government debt continues to increase due to sluggish economic pace.
Aimi Zulhazmi said Kuala Lumpur (KL) and Selangor made up more than 40% of the nation’s GDP — making it the backbone of the country’s economy — and that the CMCO impact can be felt in the fourth quarter this year (4Q20) since the implementation on Oct 14.
“It is obvious that the local tourism industry that was recovering from July has regressed, with many hotels now facing severe downturn.
“The economic effect is not only felt in the Klang Valley, but also other states that depend highly on the visit of people from the Klang Valley, such as Langkawi, Penang, Terengganu, Sabah and Sarawak,” he told The Malaysian Reserve (TMR) recently.
“The retail sector, such as shopping malls, witnessed lower than normal crowds, hence resulting in lethargic numbers from this sector,” he added.
The CMCO for Selangor, KL, Putrajaya, Sabah, Labuan, Kelantan, Perak, Penang and Negri Sembilan is currently scheduled to end on Dec 6.
Aimi Zulhazmi feels that it is necessary for the people to prepare for the economic recovery.
One of the ways is to encourage public spending to stimulate the economy, aided by all the government’s initiatives launched so far, he said.
“As the people have learned to ‘live’ with Covid-19 this year, it is time the government introduces TEMCO only on active clusters and allows the other areas under normal MCO, opening up states’ borders to speed up economic recovery.
“People must continue to live in the new norm to take care of their health wisely, but they must also be allowed to earn their living in the new world,” he added.
He further said it is imperative for the Malaysian economy to be ready for recovery next year as the global economy is primed to grow positively on the back of lesser tension from the US and China.
“With a more global business friendly under US President-elect Joe Biden and the oil prices uptrend, countries around the world are pumping fiscal stimulus to push for their respective countries’ economic recovery.
“China’s positive recovery in the second half of 2020 also provides a good indication of what can be achieved if Covid-19 vaccine is available and successful,” he said.
Meanwhile, Bumiputera Retailers Organisation president Datuk Wira Ameer Ali Mydin also suggested for the government to look at implementing TEMCO instead of extending the CMCO, as most cases are in selected areas.
He said the retail industry projects retail sale with an average growth rate of -15.1% during 4Q20.
“CMCO has led to significant reduction in shopping traffic in malls, commercial centres, and food and beverage outlets located throughout the country.
“The confusing standard operating procedures, especially on the number of people allowed in a car, also impacted the retail sector,” he said.
For the first nine months of this year, the retail sale growth rate was -18.4%, compared to the same period a year ago, according to the Malaysia Retail Industry Report (3Q20).
The report by Retail Group Malaysia (RGM) highlights that Malaysian consumers were still wary of the virus spread.
“They travelled to retail shops for the basic necessities and chose not to shop around. The reduced take-home pays also limited the purchasing power of Malaysian consumers,” the report read.
RGM, however, projects a 4.9% growth rate in retail sales for next year.