Prospects for economic recovery in the near term appear more favourable, supported by the National Recovery Plan’s (NRP) systematic re-opening of various economic sectors, including social activities such as dining-in and tourism, says a report by the Fiscal Policy Committee (FPC) after a meeting chaired by the Prime Minister DS Ismail Sabri Yaakob yesterday.
The report says the timely implementation of the various stimulus and assistance packages has provided additional impetus to economic recovery, as evidenced by improvements in economic indicators.
The committee says there is a strong rebound in the monthly GDP growth, from a decline of 28.8% in April 2020 to surges of 40.1% and 19.8% in April and May 2021, respectively.
However, GDP growth in June fell by 4.4% due to the impact of the MCO 3.0 which began in mid-May, and Phase 1 of the NRP in early June.
There is also a recovery in the labour market, with the unemployment rate improving to 4.8% in July 2021, from a high of 5.3% in May 2020.
The committee also notes the increased manufacturing sector sales by 0.6% to RM119.8 billion in July 2021, compared to a 33% reduction in April 2020.
Meanwhile, external trade expansion, with exports expanding by 18.4% to RM95.6 billion in August 2021, while imports improved by 12.5% to RM74.2 billion; and the increase in the Leading Index by 0.5% in July 2021, after a 6.0% drop in April 2020, indicates a gradual economic recovery in the near-term and improved economic prospects by 2022.
The Committee also discussed the Government’s fiscal outlook for the coming year, as well as its medium-term fiscal trajectory. The Government’s fiscal policy will continue to be centred on providing constant support in promoting a sustainable economic recovery and the smooth implementation of the recently announced Twelfth Malaysia Plan, 2021-2025.
Of immediate priority is restoring the nation’s potential growth capacity to allow communities and businesses to adjust to new norms, as well as to invest for future growth and better job opportunities. Given the need for spending flexibility during this unprecedented pandemic crisis, the Government will table a motion during the current Parliamentary sitting to raise its statutory debt limit from 60% to 65% of GDP.