KUALA LUMPUR: Malaysia's economy is likely to grow by 6.7 per cent in 2021 following a projected contraction of 5.8 per cent in 2020 caused by the Covid-19 pandemic, according to the World Bank Group.
In its latest edition of the World Bank Malaysia Economic Monitor: Sowing the Seeds launched today, the report revealed that the successful containment of the third wave and effective roll out and distribution of vaccine could lead to a faster-than-expected recovery in consumer demand.
This would in turn promote greater investor confidence, and consequently a more robust recovery in domestic economic activity in 2021.
Minister in the Prime Minister's Department in charge of economy Datuk Seri Mustapa Mohamed said Malaysia's economic growth is expected to be 'quite bad' in the fourth quarter (Q4) of 2020 due to the resurgence of the Covid-19 cases in October and November.
However, he did not specify any projection but warned that the negative numbers could be recorded due the re-imposition of the Conditional Movement Control Order (CMCO) with some stricter rules in selected parts of the country in the last two months of 2020.
"Q4 is going to be a lot more challenging than we were anticipated earlier. During the mid-year, the general expectation that there was going to be a gradual economic recovery in Q4.
"But now, it (restriction) has been eased up and that will result in quicker recovery of the economy towards the end of this year," he said during a panel discussion with the World Bank representative to Malaysia and country manager Dr Firas Raad today.
Mustapa said one of the government's priorities is to expedite the recovery process by easing the CMCO, which began on December 7.
"At the beginning of the year, our priorities were health and the protection of the people's lives, while ensuring there was food on the table.
"Besides the priority on health, now we need to ensure that lives and jobs are protected. We have continued the scheme to subsidise wages (jobs) under the 2021 Budget. The latest number of unemployment stood at 4.6 per cent in September with 750,000 people jobless."
He said the unemployment rate might experience a slight increase in October and assured that the government was on track in preparing for recovery, in particular, the job market.
"We need to ensure that people's lives and jobs are protected while preparing to loosen up the fiscal deficit (6.0 per cent this year) with a direct cash injection of RM55 billion in the hope to stimulate the economic growth," he said.
In respect of development expenditure, Mustapa said the government had about RM50 billion in actual spending this year and another allocation of RM70 billion will be spent next year for the public infrastructure development.
"We hope this will stimulate the economic growth, and assist in recovery, particularly the public infrastructure projects with high multiplier effects," he said.
Meanwhile, he said the pandemic has affected the government's plan to present the 12th Malaysia Plan, which was supposed to be presented at the parliament on August 6.
He said Covid-19 has motivated the government to shift the 12th Malaysia Plan's presentation to early next year as the pandemic has weighed on the ministry's planning.
"We need to go back to the drawing board and start engagement once again. There have been massive changes in the economic landscape globally and locally.
"We have to recognise this as any plans have to be realistic. Many of our forecast which we have done early this year - we need to revisit the targets as Covid-19 has resulted in a lot of new thinking."
Mustapa said the government has been active in various engagements with the civil society, students leaders, politicians and members of parliament and oppositions.
He said the government will address cross-cutting issues in particular digitalisation efforts in education, agriculture, micro small medium enterprises and manufacturing sectors.
"We expect digital initiatives in 12th Malaysia Plan. Agriculture continues to be an important sector, we have revisited our strategy on agriculture, manufacturing and advanced electrical and electronic."
Mustapa said the government will also focus on the issue of stagnation of wages, which has not been moving up fast inline with the rising cost of living.
"We need to address the issue of quality jobs opportunities. Hence, we need to bring foreign direct investments into the country," he added.