KUALA LUMPUR: Malaysia's economy is projected to grow by 4.5 per cent this year, down from the initial forecast of 6.0 per cent, according to the World Bank Group
The World Bank senior economist of macroeconomics, trade and investment Shakira Teh Sharifuddin said the revision reflected the resurgence of Covid-19 cases beginning in mid-April 2021 and slower-than-expected vaccination programme.
"The lockdown will continue to impact Malaysia's gross domestic product (GDP) growth, besides ineffective containment of the pandemic as well as slower vaccinate rate and political uncertainty," Shakira said after the launch of the World Bank's "24th Malaysia Economic Monitor: Weathering the Surge" report here yesterday.
Malaysia's economy posted a slight contraction of 0.5 per cent in the first quarter (Q1) of 2021 from -3.4 per cent in Q4 of 2020.
She said Malaysia's growth would be dependent on the length and severity of the movement restriction, effectiveness of the pandemic containment measures and pace of vaccination rollout.
"The negative spillover effect from the pandemic continues to weigh on growth but is cushioned by several developments - less restrictive movement control in earlier part of the year and measures such as i-Sinar scheme that provided support to private consumption," she said.
Shakira said the local economy was also benefitted from the general strengthening in global trade activities, reflected in the acceleration of manufacturing exports which expanded to almost 22 per cent in Q1 on increased demand of global electronics and rubber gloves.
The recent spike in infections has raised concerns about the overall capacity of Malaysia's health system and the effects of the ongoing cycle of opening and closing the economy on households and firms. according to the report.
The report suggested that Malaysia's immediate priority must focus on the efficient and sustained management of the ongoing pandemic and its effects on individuals, households, and firms.
Protecting the lives and health of citizens and thereby preventing further strains on the country's health system is vital to ensure a safe resumption of economic activities and a prevention of a more protracted economic downturn.
The World Bank said Malaysia's economic recovery hinged on policies to promote immediate relief and on clear, accessible and targeted support programs to enable firms to preserve liquidity.
Recovery efforts should include the extension of conditional wage subsidies, improving the predictability of standard operating procedure regulations and expediting approvals and disbursements for existing loans.
In the medium and long term, however, deep and structural reforms would be required for a private-led post-pandemic economic recovery, it added.