PETALING JAYA: An economist has criticised Putrajaya’s decision to maintain its gross domestic product (GDP) growth target of between 6.5% and 7.5% for 2021, saying the projection has become more unrealistic than when it tabled the 2021 budget.
Center for Market Education CEO Carmelo Ferlito said Putrajaya “must get real” now that the nation was under another round of the movement control order.
He told FMT he had already thought the projection was unrealistic when the budget was tabled and now believed all the more that it was inconsistent with the direction the country was heading towards.
“Such a forecast is acceptable only if we assume Covid-19 ends tomorrow, business and consumer confidence restores overnight with open borders and the activities destroyed during the lockdown magically reappear,” he said.
“Even without MCO 2.0, I think we need to expect a reverse square root trajectory, whereby the physiological rebound following the relaxation of some of the lockdown rules would be followed by a more or less flat growth, if not negative growth.”
To prevent a flat GDP trajectory, he said, the government would need to avoid generalised lockdowns, come up with a clear economic strategy and ensure a stable political climate.
He added that the “hiccup lockdown” strategy employed by Malaysia would unnerve the business community and deter companies from making making new investments.
He said the reluctance would be seen in both foreign and domestic investors.
He noted that 16 companies from China, Taiwan, Japan, South Korea and the US had recently relocated to Indonesia.
Finance Minister Tengku Zafrul Aziz said earlier that Putrajaya was maintaining its 6.5% to 7.5% GDP growth target for this year despite the emergency declaration and the second MCO.
“It is still early and we are still in the first quarter of the year,” he said. “So we are maintaining it but our forecast is at risk given what is happening during MCO 2.0.”
Tengku Zafrul also said Putrajaya expected the country to lose RM700 million daily due to the MCO.
Yeah Kim Leng, professor of economics at Sunway University, said the daily loss of RM700 million would increase the risk of falling short of projections. An eight-week MCO would cause a loss of more than 2% of the GDP, he told FMT.
“The finance minister’s viewpoint that it is premature to revise the projected GDP growth range for 2021 is appropriate and justifiable given that we are just a few weeks into the year,” he said.
“The official forecast range will be scrutinised intensely and adjusted if warranted when the central bank releases its annual report and economic outlook for the year at the end of March.”
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