Malaysia’s Finance Minister, Tengku Zafrul Tengku Abdul Aziz said that Malaysia cannot afford another total lockdown currently. It will be extremely detrimental to the country’s economy.
The current nationwide Movement Control Order (MCO) has been imposed in all states except Sarawak until Feb 4. Apparently, he said that it is harder to achieve the target growth forecast of between 6.5% and 7.5% this year. The assumption is when there is no MCO.
He added that automated sectors like aeronautical, automotive can operate as normal, sticking to standard operating procedures. While for labour-intensive sectors that contributed to the rise in cases, authorities must enforce tighter operating procedures.
In the first half of 2020, Malaysia managed to reduce its COVID-19 cases to single digits after lockdown that ceased almost all economic activities. In contrast, the second imposed MCO has permitted more economic sectors to continue functioning. However, many people invoke for a stricter lockdown due to the four-digit spike in daily cases.
MCO 2.0 has a less severe impact on Malaysia economy compared to MCO 1.0
The former CEO of Malaysia’s second-largest banking group CIMB, Mr Tengku Zafrul pointed out that the impact of MCO 2.0 on the economy is less severe than the stricter MCO last year.
This time’s MCO that has lost about RM700 million a day is lesser than the first MCO that cost RM2.4 billion a day. Apparently, 90% of Malaysia’s economy is still moving with probably half of the workforce is working.
The minister unveiled Malaysia’s largest national budget in October, which worth around RM325 billion. There are economic deficiency target with 5.4% of GDP, and the growth forecast of between 6.5% and 7.5% this year. Therefore, some economists think that the government is being overly optimistic toward the projections.
He added that Malaysia has a debt ceiling, debt to GDP ratio at 60% where going above it will require approval from parliament. Our debt service ratio is currently above 30%.
Reintroduction of GST should not be discounted
Seems like Prime Minister Muhyiddin Yassin intended to look into the proposal to reintroduce the Goods and Service Tax (GST).
The Financial Minister said that the government has set up a committee a few months ago to look into improving the government revenue stream. He also added that this is not the right timing to impose any new form of taxation.
“But over the longer term, I think we cannot discount that possibility of reintroducing GST.”
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