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Sunday, March 7, 2021

Moody’s rating illustrates effectiveness of govt policies

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PETALING JAYA: Economists have backed the effectiveness of the government’s economic policies after ratings agency Moody’s maintained the country’s local and foreign currency issue rating, but say they must also look towards longer term strategies.

In late January, Moody’s reaffirmed Malaysia’s A3 rating with a stable outlook, citing “credible and effective” policymaking that it believes will bolster strong medium-term growth.

Juita Mohamad, an economist at the Institute of Strategic and International Studies, said the efforts made across the government’s various stimulus packages helped businesses to continue operating while cushioning the financial impact on vulnerable people affected by the economic downturn.

“By making more disposable income available to the vulnerable groups, it can help households who have lost their livelihoods and stimulate consumption on essential goods for businesses on the ground in the immediate term,” she told FMT.

Juita Mohamad.

She said the most recent Permai aid package, introduced during the latest iteration of the movement control order (MCO), was primarily driven by initiatives to support micro, small and medium businesses.

“With more aid given to stimulate the economy, the more attractive the Malaysian market is for investors in different sectors in the near future, despite the downside risks of the pandemic to the economic growth.”

She said this, along with other key factors such as the imminent vaccine rollout and global trade demand, should lead to improvement compared with last year.

In future packages, Juita said she hoped the government could make more targeted aid available to single mothers, youths and the poor, who were disproportionately affected by the pandemic due to less stable employment situations and a higher proportion in informal work, excluding them from aid in some cases.

Nazari Ismail of Universiti Malaya said Moody’s decision illustrates its confidence that “Malaysia will be able to ride out this current economic problem due to the pandemic” for the next year or two.

Nazari Ismail.

He agreed that this short-term residence can at least in part be attributed to the variety of stimulus initiatives the government has implemented over the last year, such as the Penjana, Prihatin and most recent Permai packages.

He said Permai “serves to get the economy going and reduce the suffering of the rakyat, especially in the B40 category”, adding that its effects and the relaxation of movement restrictions should improve the country’s short-term economic outlook.

However, Nazari said Putrajaya needs to consider the long-term resilience of the Malaysian economy and look at how to reduce debt levels in all sectors – public, corporate and household.

“A lesson that we should learn from the pandemic is that economic shock can come at any time and, therefore, we must start thinking about how to reduce debt levels in the long term,” he said.

The latest round of aid was announced to weather the effects of the MCO that was imposed in January, and was worth RM15 billion with additional funds allocated to the wage subsidy programme, Prihatin Special Grant, as well as other assistance measures.

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