Question 2

KUALA LUMPUR (REUTERS) - Malaysia's central bank said on Friday (April 3) the economy could shrink by as much as 2 per cent or grow 0.5 per cent this year due to the coronavirus pandemic, in what would be its worst economic performance in more than a decade.

Malaysia, which has the highest number of reported coronavirus infections in Southeast Asia with more than 3,100 cases and 50 deaths, is in the middle of month-long restrictions on travel and non- essential business that have hit trade and tourism.

"Overall, risks to the domestic growth outlook are tilted to the downside, mainly due the risk of a prolonged and wider spread of Covid-19 and its effects on the global and domestic economy," Bank Negara Malaysia said in documents released with its annual report.

Bank Negara said inflation was expected to average between -1.5 per cent and 0.5 per cent this year, lower than last year's 0.7 per cent.

It said monetary operations would continue to support liquidity in the foreign exchange, bond and money markets to ensure uninterrupted financial intermediation.

"We will continue with monetary policy that is accommodative of sustainable economic activity amid low inflation," the central bank said, adding it could employ its "policy levers" to cushion the impact of the virus.

References: News Straits Times 2020: Malaysia's central bank says economy could shrink by up to 2% in 2020 due to coronavirus

Questions:

1.Using the article as above, describe how slowdown in economic performance affects consumer's daily life. Your explanation should include examples from economic perspective.

(25 marks)

2.Critically review and suggest on how Central Bank can impose monetary policy to overcome the problem as mentioned in the article above.

(25 marks)

(Total: 50 marks)