Finance minister concedes third MCO could weigh on economic recovery, hints at revised growth forecast

Finance Minister Datuk Seri Tengku Zafrul speaks during an interview with Reuters in Putrajaya, April 5, 2021. — Reuters pic
Finance Minister Datuk Seri Tengku Zafrul speaks during an interview with Reuters in Putrajaya, April 5, 2021. — Reuters pic

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KUALA LUMPUR,, June 1 — The ongoing “total lockdown” could slow the country’s economic recovery, Finance Minister Datuk Seri Tengku Zafrul Abdul Aziz conceded today, although he said the government would still need time to assess the extent of its impact.

Zafrul hinted that the Treasury’s initial growth forecast could be revised following the third movement control order, which is expected to last at least six weeks to help public health authorities stem the rise of daily Covid-19 cases.

Daily cases are now hovering above the psychological 6,000 mark.

“In terms of timeline we will come back...it will be very soon,” Tengku Zafrul told a press conference held after detailing the government’s RM40 billion Pemerkasa Plus aid package.

“It’s very dynamic the situation we are in today. We have two weeks of phase one, we also need to estimate the effects of phase two and we also have to project an entire year,” he replied when asked for a timeline for the revised forecast.

“It’s not a simple task. We want to get a number that’s correct.”

Bank Negara Malaysia has projected the country to rebound by the second half of this year, with a GDP growth forecast of between 6 and 7.5 per cent on optimism that key industries and the labour market would pick up again, as more of the population gets vaccinated from Covid-19.

But the government led by Prime Minister Tan Sri Muhyiddin Yassin is facing mounting criticism that the rate of Malaysia’s vaccine rollout is too slow compared to its regional peers, prompting concerns that it could derail the country’s economic recovery.

Last night, Muhyiddin announced an additional RM5 billion in direct fiscal spending to help low and middle income households, as well as businesses, to weather the third lockdown.

Tengku Zafrul suggested the government was willing to fork out more money even at the prospect of racking up more debt and raising the budget deficit.

He has been criticised by the opposition as being fiscally conservative. Immediately after the RM5 billion Pemerkasa Plus package was announced, detractors took to social media to lambast the additional spending as inadequate.

The minister, although not addressing the criticism directly, brushed off the claim to say the government had no qualms about borrowing more to help the people.

“One option is to save expenditure, control or reprioritise some of the expenditures,” Zafrul replied when asked where the RM5 billion in additional spending will come from.

“Secondly, we can look at the topline of revenues, see if we are able to get more from dividends...thirdly is of course which is what we have been doing all this while, something that we would continue which is to raise debt,” he added.

“I wish to state again that it’s [still just] June [and] we need to relook at how we spend the rest of year, but what’s important is that we continue to assist the rakyat as much as we can.”

The roll out of Pemerkasa, the stimulus for the second MCO that spanned January to February is expected to push public debt up to 58.5 per cent of gross domestic product in 2021, Zafrul said in March.

The finance minister had said the government remains “committed to fiscal consolidation”.

The deficit was expected to increase to 6 per cent this year from 5.4 per cent, which several progressive economists argued is still relatively low to give the government enough fiscal space to spend more.

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