KUALA LUMPUR: The government should fully remove movement restrictions to accelerate economic recovery as more than 90 per cent of Malaysia's adult population has been fully vaccinated with falling daily Covid-19 cases, according to economists.
They said Malaysia can copy the Scandinavian countries after the government had brought the infections under control while transitioning the pandemic into the endemic phase by the end of October.
Malaysia University of Science and Technology professor Dr Geoffrey Williams said the government should emphasise both demand and supply-side policies to boost economic recovery.
"To boost demand, direct cash transfers to B40 and M40 households of RM1,500 should be given immediately and it should be phased out as demand recovers," he told the New Straits Times (NST) yesterday.
Williams said many people had lost their jobs and income had fallen during the pandemic as there was no pent-up demand.
"Consumers need support. They have used their savings and retirement funds to continue living, and some may have higher debts," he added.
On the supply-side, Williams said the government should extend its assistance for micro, small medium enterprises (MSMEs).
"They are the backbone of the economy. We can start supporting them by giving direct grants of RM10,000 to restart, rebuild and recover their businesses. This will help with restocking, paying debts and re-employment of staff," he added.
Williams initially predicted that Malaysia's economic growth would be weak in 2021, despite solid performance in the second quarter of the year.
"Gross domestic product (GDP) growth figures in Q2 were quite good due to two factors - a low base effect as Q2 2020 was the pit of the lockdown and inventory effect with firms building stocks in anticipation of opening up again."
He said there was a significant increase in inventory stocks of about RM15.8 billion in real terms during Q2 and this would be reversed in the third quarter (Q3), which could drag down GDP.
"These effects will run out now and we expect negative growth in Q3 and a 2.5 per cent year-on-year (YoY) contraction in the fourth quarter. For the year as a whole, we expect annualised growth to be between 1.8 per cent and 2.0 per cent.
"We see no inflationary pressure and expect headline inflation around 2.0 per cent to 2.2 per cent. Unemployment is epxected to be around 4.8 per cent to 5.0 per cent but underemployment will remain high around 20 per cent of the workforce," he added.
Malaysian Rating Corp Bhd (MARC) chief economist and head of research Firdaos Rosli expects international trade and public consumption to lead growth in 2021.
"Due to economic reopening, imports are likely to grow slightly faster than exports while the government will continue offering fiscal support to spur private consumption," he told the NST.
Firdaos said the government could offer higher pandemic-related aids, greater efforts in trade liberalisation and facilitation and more economic sectors reopening.
The government should also address the low-hanging fruit namely price distortions in international trade.
"One way to do this is by temporarily suspending tariffs and/or duties on goods," he said.
Firdaos said another way was by speeding up the ratification process of Regional Comprehensive Economic Partnership and Comprehensive and Progressive Trans-Pacific Partnership.
"However, this may take a longer time for quick and effective execution."
He said MARC had retained its GDP forecast for Malaysia at 3.9 per cent for 2021, below the pre-pandemic levels.
"We will eventually see the fruits of economic reopening as consumption finds its new equilibrium level. Any move to normalise the services sector is positive for the economy."
Since most economic sectors were opened for business, he said the next step was to reopen schools.
"This is important not only on the social side but on the supporting services sector such as school bus, school uniforms and food and beverages," he added.
Juwai IQI chief economist Shan Saeed concurred that the government had made an excellent move to open the economy, allowing people to restart businesses and consumption to operate at a structured pace.
"In the last 27 days, we have witnessed that demand for general items have gone up by 10 per cent to 15 per cent, and online purchases are up by 20 per cent to 25 per cent with malls getting more people than four months ago.
"Hotel occupancy is back at 40 per cent to 60 per cent with more consumers hitting the restaurants for dining," he told the NST today.
With 90 per cent of the population fully vaccinated, Shan said Malaysia was on course to achieve the GDP target of between 3.0 per cent and 4.0 per cent for the current fiscal year.
"The government is totally committed to provide all the support through its 12th Malaysian Plan. The government wants to maintain macro-economic stability to bolster that growth outlook for the year which is the best strategy at the moment," he added.