2021 The Year of Recovery ?
In 2020, our world economy endured its deepest recession, as the Covid-19 upended lives and livelihood. Last year, the coronavirus has caused half the world’s population to virtually shut down businesses, trade, travel and to remain indoors. Marching in 2021, what would the economy of 2021 be like? According to the Organization For Economic Co-operation and Development (OECD), the global output will return to pre-pandemic levels by the end of 2021 after witnessing a sharp decline of 4.2% last year.
Aided by COVID-19 vaccine rollouts and accommodative fiscal and monetary policies, projections suggested that global GDP to rise in the coming 2 years, 4.2% in 2021 and 3.7% in 2022. Accounting for ⅓ of the world economic growth, the recovery will be led by China, which is forecast to grow by 8% next year.
There is now hope for a brighter future with the progress of vaccines and treatment that have lifted expectations and uncertainty, for the first time since the pandemic began. 3 Covid-19 vaccines have been found safe and effective in clinical trials. Those developed by AstraZeneca and the University of Oxford, which has so far witnessed the maximum interest from governments and organizations worldwide.
The recovery will be uneven across countries. The countries with an effective track, test and isolation systems, where vaccination will be deployed rapidly, will likely perform relatively well. China which started recovering earlier than its peers, recorded economic growth of 1.8% last year. It becomes the only major economy to record economic growth in 2020.
Supported by both domestic and external demand, the International Monetary Fund (IMF) is projecting Malaysia’s economy to rebound by 7% in 2021, but recovery will be uneven across sectors. According to World Bank Group, Malaysia’s economic recovery in 2021 is vastly due to the rollout of Covid-19 vaccine that would happen in Q121.
The economic fallout is expected to hurt the most vulnerable. Some businesses and start-up will go out of business. With people being asked to work from home and schools and universities taking their classes online during the lockdowns is only expected to set children and youth from less well-off backgrounds back by years. This would only have more long-lasting damage to the economy. Despite the huge policy Band-Aid, and even in an upside scenario, the pandemic will have damaged the socioeconomic fabric of countries worldwide.
So far the government and central bank have been pumping in money, despite the breakthroughs on the vaccine front.
Malaysia on the other hand will continue to pump-priming its coronavirus-battered economy, with the unveiling of Budget 2021. The Prime Minister Muhyiddin Yassin said that the first budget will be expansionary, in line with measures to rescue suffering citizens. Cash handouts of 8.1 million to recipients worth RM6.5billion ringgit, as compared to Budget 2020’s RM5 billion for 4.3 million beneficiaries are among initiatives to ease the public burden. 500,000 new opportunities were created with the new RM3.7billion jobs scheme to subsidize up to 40% of wages.
To conclude, the government of Malaysia should continue to invest in public & social health measures to limit the impact of virus outbreaks and supporting firms and jobs to ensure a faster recovery when restrictions are lifted.
Article Contributed by: Loo Yi Chen