KUALA LUMPUR: Malaysia’s unemployment rate may rise if gross domestic product (GDP) growth falls between 0.8 and 1.2 per cent.
Economist professor Dr Yeah Kim Leng said the hit to the country’s GDP in the face of the Covid-19 outbreak was equivalent to an estimated 120,000 to 180,000 job losses, based on the value-added per employee and total GDP value for last year.
“However, the actual impact on unemployment could be lower due to the government’s stimulus package, soft loans given to businesses to continue operating, employees taking pay cuts and the shedding of foreign employees rather than local workers.
“An easing of the global pandemic and a quick recovery of the badly-hit countries, particularly China, by the third or fourth quarter of this year will also see a reduced impact,” he told the New Straits Times yesterday.
The Sunway University Business School academician said firms which were badly affected by loss of business due to the outbreak should be encouraged to shed staff as a last resort.
Companies, he said, should first seek government assistance and support from lending institutions as provided in the stimulus package.
“These include soft loans, deferred loan repayment and easier access to working capital. If these financial aids are insufficient, they can undertake cost reduction strategies, such as reduced work days and salary cuts.”
Yeah said among the sectors that would feel the brunt of the pandemic were the aviation, tourism, hotels and restaurants, tourism-related transport, retail, convention, exhibition and event sectors.
He suggested that the government implement the outbreak containment strategies effectively so that the infection rate would not rise to a point that would require mass quarantines and lock-down of infected areas.
“The government has to quickly roll out the Covid-19 stimulus package to provide tax relief and financial assistance to businesses and employees in the affected industries.
“Other measures to boost domestic spending and reduce the impact of supply chain disruptions are needed to support the economy in facing the supply and demand shocks.”
On Friday, Prime Minister Tan Sri Muhyiddin Yassin in his address on Covid-19 said the government had estimated Malaysia’s GDP to decrease between 0.8 per cent and 1.2 per cent, or a decline by RM10.8 billion to RM17.3 billion.
Economist Datuk Dr John Anthony Xavier said a decline in GDP would translate to a similar decline in the income of Malaysians, and, accordingly, tax revenue for the government.
“This may give rise to another cycle of GDP decline as it is private consumption that primarily drives (economic) growth.”
He said there was a possibility of retrenchments, adding that the supply chain disruptions would stop the production operations of companies due to the depletion of their inventory of supplies.
Xavier said with the perception of the loss of wealth from losses in the equity market, consumers would curtail their consumption, which will shrink demand and cause a decline in national output.
“As people get sick, get retrenched, and do not buy much because they do not want to go to shopping malls, the manufacturing sector too will be hit hard. These will have a ripple effect on demand for goods and services of other industries as people cut down on their spending.”
If the situation persisted, Xavier said the government would have to double down and extend the economic stimulus for another six months.
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