KUALA LUMPUR (Oct 12): An economist says the government should exercise fiscal discipline to ensure the fiscal deficit target returns to a long-term average of 4% of gross domestic product. 

It needs to come out with some strategic plans in the upcoming national budget to ensure the fiscal deficit target is back on track, after hitting a high of 6% to 6.5% by end of the year, said Affin Hwang Investment Bank research head and economist Alan Tan. 

“That is important as it demonstrates the government’s commitment towards fiscal consolidation and also fiscal discipline,” Tan said, adding there is a need for the government to ensure that the actual ratings do not get downgraded by rating agencies.  

He was speaking in a panel discussion on “Assessing Covid-19 impacts on the economy and implications for business” at the Malaysian Economic Summit 2020.  
 
Fitch Ratings in April revised the outlook on Malaysia from stable to negative, as it felt the country’s economy was being heavily affected by the Covid-19 pandemic. 
 
In June, S&P Global Ratings also revised its outlook on Malaysia to negative to reflect the additional downside risk to the government’s fiscal metrics, given the weak global economic climate and heightened policy uncertainty. 
 
“Assuming any of them downgrade Malaysia’s rating, the country’s borrowing cost will go up, risk premium may go up. We may also see ringgit depreciating,” Tan said. 
 
“Therefore, it is important to have this balance, on one hand supporting the economy, on the other hand adopting fiscal discipline and consolidation after Covid-19,” Tan, who has adopted a cautious but optimistic stance on the Malaysian economy, added. 
 
Meanwhile, Khazanah Research Institute visiting senior fellow Dr. Jomo Kwame Sundaram said the government’s economic stimulus package is inadequate and has limited impact on the country’s economy.  

According to him, most small and medium enterprises and micro enterprises have not benefited from the bulk of the measures. 
 
“Part of the reason for this is that we took our guidance mainly from the Western approaches such as inducing employers not to let go of workers by subsidising the continued employment of staff…but this is not really helping more than half of the labour force who are not protected by contracts,” he said. 
 
Jomo also said the government needs to pay attention to foreign workers who are undocumented, in containing Covid-19. 
 
“We know the so-called second wave in Singapore, it is extremely important to pay attention to the possibility of contagion among foreign workers. We need to pay more attention to the circumstance, not to penalise them, inducing them to be tested,” he added. 
 
Citing Human Resources Ministry data, Jomo said only two million of the country’s six to seven million foreign workers are documented. 

Jomo, who has served as the UN assistant secretary-general for economic development and as assistant director-general at the UN Food and Agriculture Organisation, stressed the need for Putrajaya to consider different testing methods to contain the contagion. 
 
In the long term, he said the government should explore the opportunities of renewable energy and the new generation of food agriculture.