This article first appeared in The Edge Financial Daily on January 31, 2020
KUALA LUMPUR: In view of the Wuhan virus outbreak, the government is not discounting the likelihood of hastening the stimulus package, which is planned to address the US-China trade war risks. But Finance Minister Lim Guan Eng (pic) stressed this would happen only if it is really necessary.
Yesterday, Guan Eng told the media that it may be too early for the government to revise the country’s gross domestic product (GDP) growth forecast of 4.8% in 2020, pending a more detailed study on the overall impact of the outbreak.
Thailand’s finance ministry on Wednesday cut its GDP forecast for 2020 to 2.8% from 3.3% projected three months ago. The reasons for the lower forecast were weaker exports, a delayed budget and the spread of a new virus from China.
“We need to wait and see. We need to be aware that Thailand welcomes some 11 million tourists from China annually, compared with two to three million in Malaysia. There is a big difference.
“So there will be an impact [of lower tourist arrivals on the local economy], but [it is] unlike what is faced by Thailand,” Guan Eng said.
“But if there is an impact, the cabinet acknowledged that the ministry of finance is evaluating and planning to launch an economic stimulus package, if needed. But this is still in its early stages,” he added.
For now, Guan Eng said the sector that may need assistance will be the tourism industry, as it will be affected by the episode.
Malaysia has launched the Visit Malaysia 2020 campaign to boost the country’s tourism as a means to drive domestic economic growth, with Chinese tourists as a primary target.
China is Malaysia’s biggest export destination, accounting for around 14% of Malaysia’s total exports of nearly RM1 trillion in 2018 and in the first 11 months of 2019.
World Bank East Asia and the Pacific vice-president Victoria Kwakwa, who was also present at the press conference, commented that the World Bank is still assessing the economic impact of the Wuhan virus on the global economy.
Describing the outbreak as “more than an event in East Asia”, Kwakwa said the World Bank is working with partners to track the latest developments in the outbreak and to provide the necessary support.
“Of course [the attention goes] to the government of China first, which is the epicentre [of the outbreak].
“The support can be in terms of technical assistance, analysis, sharing experience of similar pandemics and how they have been controlled, such as SARS (severe acute respiratory syndrome) and Ebola.
“All of that, we have the experience, so we are pooling some of this together quickly for the Chinese government to see if there are any lessons that they will find useful, and working through some of the projects that we financed to provide financial support.”
“I think it is important to take time and do the analysis,” she said, such as channels of transmission, impact towards demand in key sectors, and also impact from loss of working days and death tolls, to name a few.
At press time, the Wuhan virus had spread to 20 countries, with 7,814 confirmed cases, and 170 deaths in China.
The World Bank Group yesterday announced it had entered into an agreement with the Malaysian government to extend its research operations in the country for five years between 2021 and 2025.
Malaysia and the World Bank Group first signed agreements to establish a knowledge and research hub in Kuala Lumpur in January 2015.
The World Bank Group office in Malaysia is housed in Sasana Kijang, a Bank Negara Malaysia facility providing office space for multiple international organisations and dedicated to educational learning and collaborations.