Malaysia on Path to Worst Economic Recession in History

By Adedapo Adesanya

As more countries are coming to terms with changes brought about by current health challenge, Malaysia is facing its worst economic recession in history due to the COVID-19 pandemic.

According to the country’s Finance Minister, Mr Tengku Datuk Seri Zafrul Tengku Abdul Aziz, the recession has not only affected the nation’s gross domestic product (GDP) but also contributed towards a rise in unemployment.

“The important thing here now is how fast we can manage this (Covid-19) pandemic situation. If we can manage the situation swiftly, our nation’s economy and development could also recover swiftly.

“I am not sure when we could come up the vaccine for Covid-19, but with the help of the people, the government and everyone involved, we can help manage the situation and help the economy recover,” he said.

He also revealed that the economic recession has impacted the nation’s income, with the country hemorrhaging RM (Malaysian ringgit) 2.4 billion daily.

Mr Tengku Zafrul added that in the first two weeks of the country’s lockdown, Malaysia’s economic growth, which was previously at two percent, declined to 0.5 per cent; and within the five weeks, the GDP is expected to decline between three and four percent.

“If there was no Prihatin Rakyat Economic Stimulus Package, the decline in the GDP would be more pronounced. The Prihatin package can generate up to 2.8 percent for the GDP.

“Therefore, this package is important to help the economy recover in the short and medium term,” he said.

As an oil dependent economy, the Minister said the price for a barrel of crude oil is between $20 and $25 and due to current low price, the nation’s fiscal deficit has increased from 4.7 percent to five per cent.

“We need to remember that during the global financial crisis of 2009, our budget deficit stood at 6.7 percent. If we look at the Prihatin package and the crude oil price, our deficit is estimated to be between 4.7 percent and 5 percent,” he said.

On Malaysia’s current debt status ratio to its GDP, Mr Tengku Zafrul said it stands at about 51 percent (the ceiling being 55 per cent).

Asked if there is a need to revise the country’s debt ceiling limit, he said at the moment, there is no necessity. This is because the country’s overseas debt is between two and three percent.

“The overseas ceiling debt is about RM35 billion but we have more space. The most important thing here is that all countries are facing the same problem. They have to borrow or carry out fiscal stimulus measures to help their people and their economies,” he said.

Mr Tengku Zafrul also said the government will announce an economic recovery package by the end of this month and the budget will be tabled in November.