KUALA LUMPUR: Solid fundamentals built over the years have accorded Malaysia some resilience to deal with Covid-19 shocks, says Bursa Malaysia Bhd chairman Tan Sri Abdul Wahid Omar.
He said the country’s healthcare system has demonstrated robustness and resilience during the ongoing health crisis.
In addition, diversified sources of growth and external trade structure have helped mitigate domestic and external developments, while the continued presence of domestic and institutional investors, as well as deep and liquid financial markets remain supportive of an orderly financial market condition, he said.
“We must admit that none of us saw this global pandemic coming. But Alhamdulillah, Malaysia entered into this pandemic from a position of strength,” he said in his speech at the Malaysian Economic Summit 2020.
The event themed “Covid-19: Assessing Financial and Economic Impacts and Its Aftermath” was organised by the Kingsley Strategic Institute for Asia Pacific (KSI) and The Economic Club of Kuala Lumpur (ECKL).
Wahid, who is also chairman of ECKL Advisory Council, said a multi-pronged approach by the government, Bank Negara Malaysia (BNM), the Securities Commission Malaysia and the private sector in responding concertedly and swiftly have helped the country endure and recover to some extent from the economic impact of Covid-19.
“The signs have been positive. Key indicators, such as wholesale and retail trade, industrial production and exports, have rebounded significantly since the economy resumed in early May and the start of the recovery movement control order effective from June 10,” he said.
Citing the Department of Statistics’ data, Wahid said year-on-year June gross domestic product (GDP) contraction of 3.2 per cent was far less severe compared to April’s contraction of 28.6 per cent, while external trade performance has generally improved and even registered positive growth in June and July, averaging almost 6.0 per cent.
“Notably, whilst 2020 GDP is expected to contract by -3.5 per cent to -5.5 per cent, there is consensus that growth in 2021 will be stronger, with BNM projecting a range between 5.5 per cent to 8.0 per cent, and World Bank projecting a GDP growth between 6.3 per cent and 6.5 per cent,” he noted.
Having said that, Wahid believe the pace and strength of the country’s recovery are still subjected to several downside risks.
These include the current weak global economic conditions, with the World Bank projecting global 2020 GDP contraction of 5.2 per cent, while global infections continue to surge, and further waves of infections could lead to the re-imposition of lockdowns and other containment measures.
In addition, the re-escalation of trade tensions between major economies could cause renewed disruption to trade and pose additional challenges to the global economy.
At home, weaknesses in labour market conditions could weigh on private consumption.
The latest unemployment rate of 4.7 per cent in July 2020, although having improved from 5.3 per cent in May, remained elevated.
“With the recession having significant effects on potential output, reforms that bolster long-term growth prospects will be essential,” Wahid noted.
He said the latest Rating Agency Malaysia Business Confidence Survey has indicated that small and medium enterprises (SMEs) and micro-businesses still need supportive policies to stay afloat as they continue to face short-term financial liquidity challenges amid the Covid-19.
Similarly, lacklustre corporate earnings in recent years are now further weakened by the impact of the pandemic.
Hence, he said catalysts are needed to help businesses emerge stronger and quicker from the Covid-19 crisis and be future-ready, especially with the intensifying competition globally.
“Fast action is also needed to ensure domestic companies remain competitive on a regional and global scale and become catalysts for Malaysia’s transition towards becoming a developed market and high value-added, high-income economy,” he said.
He asserted the need to re-look and possibly replicate past successes such as the government-linked companies transformation programme that was introduced in 2004. - Bernama
