In the second fiscal policy committee (FPC) meeting, the finance ministry said the continued implementation of economic and fiscal stimulus measures would also support Malaysia’s economic growth, which is expected to remain strong at 6% and 5.8%, according to the International Monetary Fund (IMF) and the World Bank, respectively.
“As a small and open economy, Malaysia’s recovery is highly dependent on global economic recovery, particularly that of our major trading partners,” the finance ministry said.
Chaired by Prime Minister Ismail Sabri Yaakob, the meeting that was held for the second time this year discussed Malaysia’s current economic conditions as well as the fiscal situation, medium-term fiscal projections, and the debt position of the government.
The committee members include the finance minister, economic affairs minister, chief secretary to the government, secretary-general of the treasury, the director-general of the economic planning unit, and Bank Negara Malaysia governor.
The finance ministry said prospects for economic recovery in the near-term appeared more favourable, supported by the national recovery plan’s (NRP) systematic reopening of various economic sectors, including social activities such as dining-in and tourism.
“Furthermore, the timely implementation of the various stimulus and assistance packages has provided additional impetus to economic recovery, as evidenced by improvements in economic indicators such as a strong rebound in the monthly gross domestic product (GDP) growth, from a decline of 28.8% in April 2020, to surges of 40.1% and 19.8% in April and May 2021, respectively.
“However, GDP growth in June fell by 4.4% due to the impact of the movement control order 3.0 which began in mid-May, and Phase 1 of the NRP in early June,” it said.
The improvement in the economy has been supported by a recovery in the labour market, with the unemployment rate improving to 4.8% in July 2021, from a high of 5.3% in May 2020 as well as increased manufacturing sector sales by 0.6% to RM119.8 billion in July 2021.
External trade has expanded, with exports adding 18.4% to RM95.6 billion in August 2021, while imports improved by 12.5% to RM74.2 billion.
The leading index gained 0.5% in July 2021, after a 6.0% drop in April 2020, which indicates a gradual economic recovery in the near term and improved economic prospects by 2022.