Finance minister: Downward revision of GDP forecast likely as Phase One curbs dent strong recovery hopes

The finance minister said the government is expected to revise its growth forecast as a result of the current Covid-19 containment measures. Putrajaya is scheduled to announce a new forecast in August together with a widened deficit figure. — Picture by Yusof Mat Isa
The finance minister said the government is expected to revise its growth forecast as a result of the current Covid-19 containment measures. Putrajaya is scheduled to announce a new forecast in August together with a widened deficit figure. — Picture by Yusof Mat Isa

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KUALA LUMPUR, June 29 — Malaysia’s hope for a strong economic rebound will likely be dented by strict curbs imposed under Phase One of the National Recovery Plan, Datuk Seri Tengku Zafrul Abdul Aziz conceded today. 

The finance minister said the government is expected to revise its growth forecast as a result of the current Covid-19 containment measures. Putrajaya is scheduled to announce a new forecast in August together with a widened deficit figure.

Last week, the World Bank revised its GDP growth forecast for Malaysia to between four and five per cent, to reflect the effects of mobility restrictions on output amid a resurgence in Covid-19 infections. It had initially projected a 6-7 per cent growth.

“For us in MOF and Bank Negara we are studying the cost of the current phase one...and also the mitigating impact with the introduction of Pemulih,” Tengku Zafrul told a press conference held virtually.

“So yes the short answer is we expect the GDP forecast that we announced much earlier will have to be revised downward,” he said.

Pemulih, the latest relief Covid-19 package announced by the government yesterday totalling RM150 billion is expected to add two per cent to the overall growth, Zafrul said.

From the total, RM10 billion will be channelled directly into the pockets of lower and middle income households.

The Perikatan Nasional government has already unveiled seven packages totalling RM380 billion in response to the public health crisis, forcing it to defer plans to reduce its debt load.

Tengku Zafrul said the government would recalibrate government expenditure, increase investment yields and borrow more to fund Pemulih, which is expected to push the deficit beyond the initial six per cent target.

Putrajaya has repeatedly stated its commitment to reducing the government’s deficit even as it tabled a record RM330 billion in federal budget for this year in a bid to resuscitate the economy.

Official estimates put the losses from the various movement control orders between RM1 billion to RM2.5 billion a day.

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