This latest projection is lower than earlier forecasts of 6.0 percent growth, reflecting a slower pathway toward suppressing the pandemic and a slower-than-expected vaccine rollout.
According to the report, Malaysia’s immediate priority must focus on the efficient and sustained management of the ongoing pandemic and its effects on individuals, households, and firms.
Protecting the lives and health of citizens - and thereby preventing further strains on the country’s health system - is vital to ensure a safe resumption of economic activities and a prevention of a more protracted economic downturn.
"Throughout the past year, the World Bank Group’s Inclusive Growth and Sustainable Finance Hub in Malaysia has worked closely with the Government to address and monitor the effects of the pandemic on the country’s economy. Real-time surveys have shown that Malaysian firms are more vulnerable than their regional peers and that the pandemic is exacerbating issues that the country’s private sector was already grappling with before the pandemic," said Victoria Kwakwa, World Bank Vice President for the East Asia and Pacific Region, in a press release on Wednesday.
Despite the challenges posed by the pandemic, external economic conditions are improving - helping to facilitate an economic recovery in the country. Exports are expected to jump to 11.2 percent in 2021, a significant rebound from the -8.9 percent seen in 2020, as global demand stabilizes and investments in export-related activities continue to improve.
Malaysia’s economic recovery hinges on policies to promote immediate relief and on clear, accessible and targeted support programs to enable firms to preserve liquidity.
Recovery efforts should include the extension of conditional wage subsidies, improving the predictability of Standard Operating Procedure (SOP) regulations, and expediting approvals and disbursements for existing loans.
In the medium and long term, however, deep and structural reforms will be required for a private-led post-pandemic economic recovery.
"As a post-pandemic recovery will largely be driven by the private sector, efforts should be made to enhance the resilience of this sector over the medium-to-long term," Kwakwa stated.