Govt Intervention Important To Counterbalance Market, Economic Instability -- DON

By Harizah Hanim Mohamed KUALA LUMPUR, April 27 (Bernama) -- Government intervention in the form of ongoing assistance and initiatives serves as a counterweight to market and economic instability given that the current situation is too difficult to rely solely on the free market, said a senior lecturer at the University of Malaya’s Faculty of Economics and Administration. Dr Mohammad Tawfik Yaakub said that mixed market economic practices are more suited for navigating pandemic hurdles, and with fiscal injections and other initiatives, it could prevent the country's economic situation from further deteriorating and ultimately cushion the impact on various trade sectors. The government has injected RM305 billion in 2020 alone and for 2021, the government has channeled more than RM400 billion as part of the 6R Strategy, namely Resolve, Resilient, Restart, Recovery, Revitalise and Reform, of which the first four were implemented through the PRIHATIN, PRIHATIN SME+, PENJANA and KITA PRIHATIN stimulus packages. "These initiatives will also enable medium-sized companies to recover and reinforce related industries. While I do not believe all of the government's initiatives are perfect, I believe they can be strengthened in terms of implementation and urgency to ensure that the citizens and parties affected do not continue to face major economic disasters as a result of COVID-19,” he told Bernama. The initiatives have had a positive effect, especially on the country's economic growth, he noted, adding that this must be balanced with ongoing support and assistance. Mohammad Tawfik said the assistance worth billions of ringgit was successfully targeted to especially vulnerable groups, comprising the bottom 40 per cent and middle 40 per cent household income (B40 and M40) groups and those in need, as well as various business sectors including the micro small and medium enterprises. On whether the present level of oil prices would help to speed up economic recovery, the don said that as a player in the global oil market, Malaysia cannot avoid formulating its annual budget based on the current oil prices. “However, the government must behave in such a way and analyse the same alternatives to ensure income and revenues will benefit the government when the country is facing an uncertain future,” he added. The benchmark Brent crude is trading at around US$60 level, while Budget 2021 was formulated based on the assumption of oil prices averaging US$42 per barrel. "Whoever governs the country, they will definitely take the same action because this is the appropriate approach at this time to start efforts to restore the country's economy," he said. Meanwhile, Bank Islam chief economist Dr Mohd Afzanizam Abdul Rashid said Malaysia's economy is expected to grow by five per cent this year, driven by improvement in global demand, after the Gross Domestic Product contracted 5.6 per cent in 2020. "Another factor that will support the economic recovery is the accommodative monetary stance by Bank Negara Malaysia, and the Federal Government’s expansionary fiscal policy would help in bolstering domestic demand. “Nonetheless, economic activities would remain guarded given that it will take sometime to achieve the herd immunity," he said. Hence, he said, the bank is looking at an economy that is recovering but the speed could vary as the number of new cases continue to make headlines and the journey to achieve herd immunity will be the critical success factor for a sustainable reopening of the economy. -- BERNAMA