The major problem with the study is that the literature review is not exhaustive. This is an issue that any editor would raise. So, you have to revise the literature review before you submit your paper, irrespective of whether you are submitting to this journal or some other journal.
Therefore, I feel it would be preferable to submit your paper to the same journal as a new submission after making the recommended changes. Since the editor has not raised any major issues about the paper, such as novelty of the research or the topic being a mismatch with the journal’s scope, once the concern about the literature review has been addressed, your paper stands a good chance of clearing the initial screening process and making it to peer review.
Read these articles to learn about effective literaure search and how you should read scientific literature.