Tengku Zafrul, Malaysia’s Finance Minister under the Perikatan Harapan coalition has expressed optimism that Malaysia’s 2021 gross domestic product (GDP) would grow within the range of 6.5 per cent to 7.5 per cent as projected by the government.
He said the 2021 GDP forecast is based on various assumptions, such as the pick up in economic demand, as well as the COVID-19 vaccine that is widely expected to be available in the first quarter of 2021 (Q1 2021) which would have a positive spillover effect on Malaysia.
“I am optimistic that the GDP for 2021 will fall within the range of 6.5 per cent to 7.5 per cent, and I am not alone, this is not my projection, but the projection of the Finance Ministry and Bank Negara Malaysia.
“And our forecast is in line with those made by the International Monetary Fund, World Bank, Asian Development Bank and other rating agencies, which falls within the range of six to eight per cent,” he said.
To achieve the growth target next year, Tengku Zafrul noted that the most important thing to do is to execute the policies well.
On GDP projection for Q4 2020, Tengku Zafrul, nonetheless, admitted that there will be an adverse impact, especially on the retail and tourism sectors following the reinstatement of the Conditional Movement Control Order (CMCO) in Kuala Lumpur and Selangor, including the Klang Valley since mid-October.
The two states, according to the Finance Minister, contributed around 40 per cent of the country’s total GDP.
“But it will not (be) as bad as the Movement Control Order (MCO) in March where the daily impact cost about RM2.0 billion to RM2.4 billion a day, while during CMCO, the daily impact is about RM300 million as economic activities, manufacturing and exports still operate as usual,” he said.
The country’s economy contracted 17.1 per cent in the second quarter as it took the brunt of the MCO but improved to -2.7 per cent in the third quarter of 2020 as businesses reopened in batches.
Malaysia’s economy is expected to contract 4.5 per cent in 2020. Meanwhile on the matter of imposing windfall taxes on glove makers who have been enjoying whirlwind profits since the start of the pandemic, the Minister remarked that its this will be non-consistent policy which will a send a wrong signal to investors and could even shoo them away from investing in the country.
If the government did chose to impose the taxes then it might send a wrong signal, especially for an open economy like ours,it would make investors think twice before investing in the country, or even opt to invest in the neighbouring countries like Vietnam and Singapore which do not impose such taxes.
Tengku Zafrul said policies have to be for the long term and not based on short-term gains.