PETALING JAYA: An economist has called for drastic measures to ward off any economic recession because of the Covid-19 crisis, and suggested a RM150 billion direct cash injection into the economy.
The economist, Kameel Mydin Meera, said Malaysia might face a double recession this year, with millions losing their jobs.
To stave off the recession, he said the federal government could increase money supply from the central bank.
The government should inject RM150 billion of direct cash into the economy instead of the current measures in the RM250 billion stimulus package announced recently.
He said an increase in the money supply would help businesses to keep factories and shops running, and put food on the table.
Kameel, a former dean of the Institute of Islamic Banking and Finance at the International Islamic University Malaysia cautioned the government against borrowing any money, especially from the International Monetary Fund (IMF) and other institutions.
He said such debts would be a burden on the future generation.
Kameel added the movement control order will cause companies to shut down as they do not have the money to run their operations.
“Since money has stopped moving, the economy will shrink due to the multiplier effect,” said Kameel, who now heads a consulting group.
In a recent report, the Malaysian Institute of Economic Research speculated that 2.4 million Malaysians may be jobless as GDP growth contracts to -2.9% for 2020.
Kameel said a recession had been expected even before the Covid-19 crisis broke.
He disagreed with the forecast of a 2.8% contribution to GDP from the stimulus package, as stated by Finance Minister Tengku Zafrul Aziz recently.
“Now we will also be facing a recession from the retail sector, among all other sectors. SMEs will be badly affected with millions being retrenched,” he said, adding that only drastic measures will help Malaysia.
No growth in GDP
Nazari Ismail, a professor of economics at Universiti Malaya told FMT he is sceptical about the prospects for GDP growth for 2020.
“But I am confident the government will have additional debt as a result of it,” he said.
Another economist, Yeah Kim Leng, said the economy would take a further hit if the movement control order was extended beyond its expiry date of April 14.
“Even if it is not extended, it is likely that no mass gatherings will be allowed, and social and travel activities will be restricted to guard against new waves of the virus outbreak,” he told FMT.
The restrictions will result in a decline in consumer consumption and possibly also of production, commercial and trade activities if factories and business premises are allowed only partial opening.
He further said the estimated 2.8% contribution to GDP growth from the stimulus package has been factored into Bank Negara’s GDP growth forecast range of between – 2.0 to 0.5% in 2020.
On April 3, Bank Negara in its Economic Monetary Review 2019 said Malaysia’s economy could shrink as much as 2% for 2020 due to the Covid-19 pandemic.
During the 1998 Asian economic crisis, Malaysia suffered a 7.5% economic decline and a 1.5% decline in the 2009 global economic crisis.
Yeah said the current situation could result in either the shallow 2009 recession or the deep one in 1998. He cautioned that it is difficult to predict the extent of the recession while the global number of Covid-19 infections was still rising.
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