Coronavirus outbreak – too early to mull fiscal stimulus for Malaysian economy, says economist

GEORGE TOWN: There may be worrying signs emerging on the horizon over the Malaysian economy following the spread of the novel coronavirus pandemic globally.

However, Sunway University Business School’s Professor of Economics Dr Yeah Kim Leng (pix) said in an interview that it is too early to contemplate a fiscal stimulus to counter the pandemic.

He opined that observing patiently is the best prescription for now given the uncertainty over its severity, duration and extent of the impact of the deadly bug.

In the event of a prolonged lockdown and widening quarantine that can lead to a reduction in travel, production and consumption activities both in China and the affected countries, then a stimulus package could be readied by the end of the first quarter of this year, Yeah suggested.

He added that if the containment efforts are able to curb the spread and fatalities, then economic activities are likely to assume its normal pace by the second or third quarter.

Under this scenario, the Malaysian economy, especially the tourism sector, may not require increased allocations to boost domestic spending.

On Malaysia’s strong trade links with China, Yeah said it’s worth noting that the Chinese government has mounted fiscal and monetary stimulus to offset the negative effects of both the virus epidemic as well as the now easing tensions over the tariff trade war with the US.

Meanwhile, tourism specialists have urged the authorities to help boost the inbound market by seeking new markets and boosting domestic travel.

There should be an effort to help mitigate the escalating costs to travel for domestic destinations so Malaysians can travel and spend more to make up for the shortfall in foreign tourists, said the Langkawi Businesses Association deputy president Datuk Issac Alexander.

Tourism Langkawi protem president Ahmad Pishol Isahak also urged the Tourism Ministry to boost domestic tourism given that the foreigners are postponing their trips with the island resort recording a 40% cancellation rate.