世界发展银行-Malaysia-Economic-Monitor,-December-2020---Sowing-the-Seeds_88页_5mb

Summary of Malaysia Economic Monitor - December 2020

Core Content

The Malaysia Economic Monitor (MEM) for December 2020 provides an analysis of recent economic developments and outlines the economic outlook for 2021, with a special focus on revitalizing the national agrofood sector. The report is divided into two parts: Part 1 reviews the overall economic situation and macroeconomic projections, while Part 2 delves into the agrofood sector and its role in supporting a resilient recovery and future growth.

Main Points

Recent Economic Developments

• Economic Contraction in 2020: Malaysia experienced its sharpest recession in 20 years due to the triple shock of the pandemic, domestic movement restrictions, and a synchronized global recession.
• Growth in 2021: The economy is projected to grow by 6.7% in 2021, following a 5.8% contraction in 2020.
• Sector Performance:
  • Manufacturing: Positive growth of 3.3% in Q3 2020.
  • Services, Construction, Mining: Smaller declines as movement restrictions eased.
  • Agriculture: Slight decline of 0.7% in Q3 2020.
• Unemployment: Slightly declined to 4.7% in Q3 2020 from 5.1% in Q2 2020.
• Underemployment: Remains elevated due to prolonged restrictions.
• Exports: Improved, with a 4.4% growth in Q3 2020, driven by E&E and agricultural goods.
• Imports: Contraction eased to -6.3% in Q3 2020.
• Current Account Surplus: Increased to 7.1% of GDP in Q3 2020.
• Fiscal Deficit: Widened to 6.0% of GDP in 2020 due to economic downturn and stimulus measures.
• Financial Sector: Remained resilient with BNM maintaining the OPR at 1.75% since July 2020.
• Loan Moratorium: Provided relief but led to rising impairment ratios, expected to increase once the moratorium ends.

Economic Outlook

• Global Growth: Projected to rise to 4.2% in 2021, but not return to pre-pandemic levels in the near term.
• Malaysia's Growth: Expected to reach 6.7% in 2021, supported by a low base, improved exports, and gradual recovery in consumption and investment.
• Inflation: Headline inflation is projected to rise modestly to 0.8% in 2021, while core inflation remains contained.
• Downside Risks:
  • Delay in vaccine distribution could lead to prolonged lockdowns.
  • Ineffective containment of the third wave of infections may extend CMCO and EMCO.
  • Domestic political uncertainty could dampen private investment.
• Fiscal Outlook:
  • Fiscal deficit is expected to narrow to 5.4% in 2021.
  • Primary deficit is projected to fall to 2.9% of GDP from 3.6% in 2020.
  • MTFF targets a 4.5% average budget deficit from 2021 to 2023, assuming 4.5–5.5% GDP growth.
  • The government aims to broaden the revenue base, reduce leakages, and enhance targeting of tax incentives.

Key Information from Part 2: Sowing the Seeds

• Agrofood Sector: The pandemic has underscored the importance of the agrofood system and the need for a broader approach to food security and policy.
• Agricultural Economy: Malaysia's agricultural strategy has created a two-speed economy, with some segments performing well and others lagging.
• Opportunities for Reform: The agrofood sector faces growing opportunities, including integration with the "farm-to-fork" food economy and embracing the digital economy.
• Quality and Safety: Enhanced measures in these areas will strengthen the agrofood system.
• Policy Opportunities: The 12th Malaysia Plan (RMK12) and the Cabinet Committee on National Food Security Policy offer chances to reorient agrofood policy towards a more inclusive and sustainable growth model.
• Role of Agrofood Sector: Revitalizing this sector is crucial for supporting a resilient recovery and achieving long-term economic growth, especially as Malaysia approaches high-income status.

Conclusion

The report emphasizes the need for bold structural reforms to ensure durable and inclusive growth in the post-pandemic era. It highlights the importance of fiscal discipline, revenue mobilization, and targeted social spending to address the fiscal legacies of the crisis and pre-existing structural weaknesses. The agrofood sector is identified as a key area for policy intervention to support economic resilience and sustainable development.

Key Takeaways

• The economic recovery is uncertain and depends on vaccine distribution and global conditions.
• Fiscal consolidation is necessary, but social protection remains vital.
• The agrofood sector requires modernization, diversification, and policy reform to support future growth.
• The 12th Malaysia Plan and food security policy are pivotal in shaping the future of the agrofood sector.