KUALA LUMPUR: An increase in government spending is vital to revive the country's economy, the Dewan Rakyat was told yesterday.
Minister in the Prime Minister's Department (Economy) Datuk Seri Mustapa Mohamed said the Covid-19 pandemic which impacted the nation's economy, had in turn affected government revenue.
"We need a new approach, taking into account the current global economic situation, and also based on a drastic drop in our revenue.
"This means that to generate revenue, we need to spend," he explained.
He said this after a supplementary question by Datuk Seri Saifuddin Nasution Ismail (PKR-Kulim Bandar Baru), who wanted to know about government efforts to face the economic crisis brought about by the outbreak.
"That is why the government made the decision not to look too much at the fiscal deficit, as what is often referred to as 'fiscal space'.
"We are not disregarding fiscal deficit, but it's not something that is as relevant as before," he said.
He added that Covid-19 had heavily impacted several sectors, particularly aviation and tourism - which contributed 16 per cent to the country's gross domestic product (GDP) - following the closure of international borders.
Earlier, Mustapa also said the country's economy was expected to contract between 5.5 per cent and 3.5 per cent this year, but forecasted to grow between 5.5 per cent and 8 per cent next year.
"However the economic performance for October and November will be slightly affected with the increase in cases, the third Covid-19 wave and the implementation of the Conditional Movement Control Order in Sabah, Selangor, Kuala Lumpur and Putrajaya."
He said the country has seen positive growth for August and September compared to the first quarter of this year.
He was responding to a question by Datuk Mohd Fasiah Mohd Fakeh (Bersatu-Sabak Bernam), who had asked on the extent of the economic impact of Covid-19 to individuals, households, businesses and other economic sectors.
