World Bank: Malaysia has little space for fiscal response if Covid-19 fallout drags on

Perikatan Nasional allocated less than RM30 billion for direct fiscal injection from the total stimulus packages

(MMO) – The World Bank has cautioned the Malaysian government about its inability to respond effectively should the Covid-19 fallout drag on, citing Putrajaya’s limited fiscal space for extended intervention.

South-east Asia’s third-largest economy is already struggling to shield its workforce and small businesses from the devastation wrought by the Sars-CoV-2 pandemic.

The bank warned that protracted restrictions could do more damage, given the little monetary options left for the government to extend help, even as the Muhyiddin administration injected a RM260 billion stimulus to retain jobs and keep businesses afloat.

“The large degree of uncertainty over the outcome of the outbreak presents a major downside risk to the economy,” it said in its spring macro poverty outlook.

“The other major challenge is the limited fiscal policy space to respond to the crisis.

“While the recently announced stimulus package could help to mitigate the immediate impact of the outbreak, a deeper economic policy response would be needed should the health crisis deepen and result in a longer duration of economic disruption.”

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