The World Bank said that Malaysia’s economy can be expected to be on the recovery path starting from the end of this year and return to growth into 2021. World Bank Country Manager for Malaysia, Dr Firas Raad, said Malaysia needed to continue with its encouraging and effective public health measures while bringing the economy back to where it was before the Covid-19 pandemic. He said pro-growth policies, coupled with incentives to push the private sector were crucial ingredients to employ to help the nation recover from the economic downturn.
“The country first needs to continue its effective public health measures to ensure no second wave or the return of the virus. “Aside from that, it must continue supporting vulnerable households and focus on the firms that need support and recovery, especially the small and medium enterprises (SMEs), and then start to think about the medium-term reform agendas,” he said.
Firas said Malaysia should continue its effort on the reform agendas such as those involving governance, regulatory environment and competition of economic sectors, as well as education reform, in its bid to achieve high-income nation status. “For Malaysia to cross into high-income country status, it will have to boost productivity growth, and that will only come with great investment in human capital,” he said. He added that the World Bank is in the midst of reviewing the economic impact of the Covid-19 outbreak on Malaysia’s economy before deciding whether to revise the country’s 2020 gross domestic product (GDP) growth target, sometime this month. In April, the World Bank cut Malaysia’s 2020 GDP growth forecast from 4.5% to a negative 0.1%, amid the Covid-19 outbreak.
In Washington, the World Bank forecasts that the swift and massive shock of the coronavirus pandemic and shutdown measures to contain it have plunged the global economy into a severe contraction. It added that the global economy will shrink by 5.2% this year. That would represent the deepest recession since the Second World War, with the largest fraction of economies experiencing declines in per capita output since 1870, the World Bank said in its June 2020 Global Economic Prospects.
Economic activity among advanced economies is anticipated to shrink 7% in 2020 as domestic demand and supply, trade, and finance have been severely disrupted. Emerging market and developing economies (EMDEs) are expected to shrink by 2.5% this year, their first contraction as a group in at least sixty years. Per capita incomes are expected to decline by 3.6%, which will tip millions of people into extreme poverty this year. The blow is hitting hardest in countries where the pandemic has been the most severe and where there is heavy reliance on global trade, tourism, commodity exports, and external financing. While the magnitude of disruption will vary from region to region, all EMDEs have vulnerabilities that are magnified by external shocks. Moreover, interruptions in schooling and primary healthcare access are likely to have lasting impacts on human capital development.
“This is a deeply sobering outlook, with the crisis likely to leave long-lasting scars and pose major global challenges,” said World Bank Group Vice President for Equitable Growth, Finance and Institutions, Ceyla Pazarbasioglu. “Our first order of business is to address the global health and economic emergency. Beyond that, the global community must unite to find ways to rebuild as robust a recovery as possible to prevent more people from falling into poverty and unemployment.”
Under the baseline forecast—which assumes that the pandemic recedes sufficiently to allow the lifting of domestic mitigation measures by mid-year in advanced economies and a bit later in EMDEs, that adverse global spillovers ease during the second half of the year, and that dislocations in financial markets are not long-lasting — global growth is forecast to rebound to 4.2% in 2021, as advanced economies grow 3.9% and EMDEs bounce back by 4.6%. However, the outlook is highly uncertain and downside risks are predominant, including the possibility of a more protracted pandemic, financial upheaval, and retreat from global trade and supply linkages. A downside scenario could lead the global economy to shrink by as much as 8% this year, followed by a sluggish recovery in 2021 of just over 1%, with output in EMDEs contracting by almost 5% this year.
The U.S. economy is forecast to contract 6.1% this year, reflecting the disruptions associated with pandemic-control measures. Euro Area output is expected to shrink 9.1% in 2020 as widespread outbreaks took a heavy toll on activity. Japan’s economy is anticipated to shrink 6.1% as preventive measures have slowed economic activity.
“The COVID-19 recession is singular in many respects and is likely to be the deepest one in advanced economies since the Second World War and the first output contraction in emerging and developing economies in at least the past six decades,” said World Bank Prospects Group Director Ayhan Kose. “The current episode has already seen by far the fastest and steepest downgrades in global growth forecasts on record. If the past is any guide, there may be further growth downgrades in store, implying that policymakers may need to be ready to employ additional measures to support activity.”
