KUALA LUMPUR: Malaysia has emerged as a country with notable resilience and potential for recovery amid the challenges brought about by the COVID-19 pandemic, said the World Bank.

In its report "Building Malaysia's Resilience: Lessons from COVID-19's Economic Impacts and Policy Responses", the World Bank said Malaysia leads the way in a survey which included Cambodia, Indonesia, Mongolia, the Philippines and Vietnam.

The survey examines the economic consequences and government responses to the pandemic in the six economies.

The six experienced the crisis differently and implemented various measures to contain the spread of the virus and to mitigate economic impacts with varying degrees of success, the bank noted.

Country Manager for Malaysia Yasuhiko Matsuda said the COVID-19 shock reduced employment and household income, but the report showed that Malaysia did relatively well compared to the five on the macro level.

"Sales shocks in Malaysia were more subdued, while work stoppages were moderate. However, the impact of the pandemic was uneven.

"Within Malaysia, smaller companies and poorer, more vulnerable households suffered and they have less access to government assistance as well. The problem is digital divide, for example," Matsuda noted.

Senior economist Ririn Salwa Purnamasari in her report presentation highlighted that Malaysia's economy was stable and growing before the pandemic, with a five per cent annual growth rate and was the wealthiest among the six.

"Despite the progress, Malaysia still faced challenges in reducing poverty and inequality, with the Gini index remaining relatively high for an aspiring high-income country," she said, adding that the pandemic provided valuable lessons to build resilience and manage future crises.

"Governments should prioritise equitable recovery, leverage technological advancements, and strengthen social safety nets to protect vulnerable groups.

"Continually evaluating and improving policies and investments in data-driven decision-making will be crucial in effectively navigating future challenges and ensuring a more resilient and inclusive labor market," she said.

During pandemic, the government assistance package had a wide coverage and a diverse mix of instruments for firms and households but it could have been better targeted and calibrated; support to firms appeared to be biased towards more productive, larger firms, while support to households was pro-poor but not as responsive to shocks, Ririn said.

She noted that compared with other countries in the region, Malaysia relied more heavily on support to firms in the form of liquidity, credit, and lending -- "below-the-line" measures -- and relatively low on direct support to households.

"Targeted payment deferrals (taxes or loan repayments) were more effective than income and liquidity support to address working capital crunch.

"Wage subsidies helped workers from shouldering the full brunt of the economic crisis, and preserve the relationship between employers and employees while social assistance eased the burden on households during the crisis, but the level of benefits remained largely insufficient," she said.

Moving forward, she said given the tightening fiscal space and continued distress, better targeting and consolidation of support instruments is needed.

Active labour market programmes, which include rescaling, upscaling to empower the people to help themselves is also needed. These measures are more sustainable and beneficial over the longer term, she said.

On the use of cash transfers, Matsuda said although the government was able to cover a large segment of the population, the amount was relatively small compared with those received in other countries. Hence, the impact of cash transfers in Malaysia is limited.

They were those who were not receiving and those who received were "not receiving quite enough to really make a difference," he said, adding that reach and coverage is important.

"The crisis boosted digital technology adoption, highlighting its potential to drive productivity and innovation. Governments and businesses should invest in digital infrastructure and remote work capabilities to enhance resilience and efficiency during future crises," he added.

-- BERNAMA