KUALA LUMPUR: 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 gross domestic product (GDP) growth target.
In principle, the World Bank is looking at a GDP growth of 4.5 per cent in 2020 for Malaysia.
Its Global Knowledge and Research Hub country manager (Malaysia), Dr Firas Raad said a revision was likely in light of the “evolving situation”.
“Everybody is still looking at the impact and flow channels,” he told reporters after the launch of the ‘Practitioner’s Guide to Innovation Policy’ report, here today.
According to him, the World Bank is currently studying the flow or transmission channels such as tourism, foreign direct investment (FDI), supply chain and commodity prices.
“Malaysia is a trading nation. As China is one of its biggest trading partners, there would certainly be an impact but its extent is still being examined,” he said.
Hopefully, Firas said, the economic stimulus package, which is expected to be announced by the government next week, would also include various channels that the World Bank is looking at.
“Tourism is a big sector that should be looked at, (also ways) to incentivise different activities as well as FDI,” he said.
However, he urged the government to be more careful and selective in supporting strategic industries that are suffering from the economic impact resulting from the outbreak.
“It is a difficult situation as we do not know whether the epidemic has peaked or not,” Firas said.
Meanwhile, he said small and medium enterprises (SMEs), which constitute 98.5 per cent of businesses in Malaysia and contribute up to 37 per cent to the country’s GDP, were an important segment that needed government backup through different policy instruments.
Firas said the COVID-19 outbreak might affect the SMEs through the supply chain, due to its trade link with China.
“There could also be a possible reduction in demand in Malaysia’s commodities, either palm oil, crude oil or gas, that would affect the economy, though the magnitude is yet to be ascertained,” he said.
Commenting on the report which was launched today, he said the World Bank viewed that the promotion of the innovation ecosystem was essential to support Malaysia’s transition to become a high-income and developed nation.
“Without innovation-driven activities, supported by good education reform, it is hard to get the productivity gains that the Malaysian economy needs.
“It is the next step forward as the country has come a long way in its economic reform journey from agriculture to advanced agriculture, and from basic manufacturing to advanced manufacturing,” Firas said. – BERNAMA