THE government’s decision to form a special cabinet committee to safeguard Malaysia’s economy by drawing up strategic measures is timely after business and corporate incomes are being impacted by Covid-19.

Even though the government unveiled a RM250 billion stimulus package recently, the Economic Action Council is expected to announce further financial aid early next week to help companies, especially SMEs to retain workers in these difficult times.

It is hoped that the government will also exercise flexibility by allowing industrial players to run businesses with stringent condition, ensuring they can get enough cash to meet their payrolls after the month-long MCO period.

Indeed, the swift action needs to be taken since growth for this year will be under pressure.

Based on projection by the World Bank, growth for 2020 will contract by -0.1%. Likewise, Bank Negara has revisited the growth forecast for this year to between -2 and 0.5%.

There are a combination of factors causing these swings. The former is internal which comprises of domestic demand and daily businesses and economic activities while the latter is external, which is difficult to overcome as it depends on the overall global economic recovery.

Certainly, the current economic turbulence has adversely affected our economy like previous recessions.

For instance, during the Great Depression dating back in 1930, export revenues of rubber for the country (which was known as Federated Malay States) shrank by 43.5% while tin export was also hit by almost the same amount. Since rubber and tin were the major contributors to the Malayan economy, the severe impact of both translated into economic damage.

However, trade recovered quickly from the shock. The regulatory mechanisms were taken then to maintain the commodities’ price.

The new International rubber regulation agreement in 1934-1941 and international tin cartel agreement in 1931-1941 regulated output.

Nonetheless, looking at the current situation, the scenario is different and likely to worsen. The country’s largest revenue-earner is crude oil and any disruption of price will dampen state revenues.

This situation is the result of leading producers Russia and Saudi Arabia pumping output, leading to current prices of US$20-US$30 per barrel.

In response to these challenges, all countries should get cracking and stand together facing this problem.

Apart from injecting financial aid by individual countries to stimulate their domestic economy, the negotiations among them to safeguard global trade and stabilise the supply and demand of goods worldwide are also important to minimise the impact of recession. – April 5, 2020.

* Dr Ahmad Shahir Abdul Aziz reads The Malaysian Insight.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.