Wednesday, March 25, 2020

Recession looms; possible 2.4 million will lose jobs

The Edge Markets:

Malaysia will face recession if partial lockdown extended, MIER warns

*It also calls on the govt to allocate RM75b more to cushion virus' impact

KUALA LUMPUR (March 24): Assuming the movement control order (MCO) is extended for another two weeks to contain the spread of the Covid-19 pandemic, Malaysia's real gross domestic product (GDP) may shrink by about 2.9% for 2020 compared to 2019, and result in some 2.4 million people losing their jobs, according to the Malaysian Institute of Economic Research (MIER).

MIER further estimated that any additional two-week extension of the MCO may amplify the contraction of real GDP by between 3% and 4%, relative to the 2020 baseline. These estimates are part of MIER's analysis of the economic impact of the Covid-19 outbreak in Malaysia.

Besides the shrinking real GDP, MIER projected household incomes may fall by 12% relative to the baseline, which amounts to RM95 billion. "Such a fall is manifested in a sharp decline in consumer spending by 11%, despite the drop in general consumer price level by 4.4%," it said in a statement today.

Meanwhile, MIER expects that 67% of the 2.4 million job losses it estimated (presumably mainly non-salaried jobs) will be unskilled workers. "In this challenging and unprecedented times, it will be to the nation’s best interest to depart from looking at the economy based on the conventional indicators in normal times," it said.

As such, MIER proposed that the government set aside an extraordinary crisis budget comparable to the projected income loss of RM95 billion, to mitigate the coronavirus's impact on the economy.

"Since RM20 billion has earlier been pledged, an additional RM75 billion will be needed. Such allocation will be imperative, especially to avoid company bankruptcies, loss of jobs, and impaired household incomes and welfare through business support, SME rejuvenation and social safety net programmes," it said.

It further said it is now timely for the government to revisit the country's overall socio economic goals into focusing on establishing policies, mechanism and measures to move the economy towards resiliency and genuine prosperity, not unsustainable growth-oriented policies of the many past decades.

MIER also pointed out that the state of the country's agriculture should be refocused into food-based agriculture, especially in light of the nation’s food security and sovereignty.

"For this reason, we would strongly recommend that the government consider establishing a National Food and Medical Supplies Stockpile funded by the government or in conjunction with the private sector through a Public Private Partnership (PPP) program," it suggested.

MIER also called for the government to review its fiscal policy, including the Budget 2020 that had been announced by the previous PH government, in order to deal with the economic issues due to the outbreak of the pandemic.

Going forward, MIER said it expects that "the recovery from this year’s projected economic recession due to the COVID-19 outbreak and implementation of the recommended stimulus package will result in a V-shaped recovery (as happened in all previous recessions since 1985), so that the year 2021 will see a better economic performance of the economy".

As such, it recommends that the Perikatan Nasional government reconsider bringing back the GST with appropriate adjustments to its rate and coverage, as well as improved mechanism in terms of collections and rebates, in its forthcoming 2021 budget.

"This should provide a means to cover any shortfall in federal government revenues, due to the lower expected oil receipts in the previous assessment," it added.


  1. Where is our Menteri Cap Buruh Saravanan?

    After heroically ordering all private sector employers to pay full wages during MCO he has been challenged. Now he has gone silent.

    MAS and AA cannot fly any of their planes. How to pay salaries?

    Another U-Turn in the making...? Ha ha ha....

    PETALING JAYA: The Malaysian Employers Federation (MEF) has hit out at a directive under the movement control order (MCO) requiring full payment throughout the two-week period for employees in non-essential services, saying this is unfair to employers.

    MEF executive director Shamsuddin Bardan said the directive, coupled with the present economic climate, could cause businesses to go bust.

    He said the MCO, which came into effect on March 18, had led to “zero business” for retailers although employers still had to bear operation costs such as rent and payments to suppliers.

    Under the directive, he said, employers need to pay their workers in full on top of contributing to the Employees Provident Fund and Socso as well as servicing bank loans.

    “It’s an unrealistic policy and could see a bigger number of people being retrenched at a faster rate,” he told FMT.

    He also questioned whether the ministry had considered where employers would get their revenue throughout the MCO.

  2. Azmin Ali, what happened to your Shared Prosperity 2030 that you prepared for Toonsie. Will you re-name it to Shared Pain and Poverty 2020?

    Fortunately Guanee left the blueprint for the 20 billion COV19 Rescue Package on his table at the FM for Tengku Zafrul to just follow, because the poor chap is only a banker, cushy jobs all his life. And even this Rescue Package Azmin tries to claim credit for, even though it was Guanee who worked diligently on until the night of Feb 23, when Azmin was unveiling his coup de etat.

    Then on Feb 27, by which time Guanee had lost his job Azmin had the gall to claim credit for Guanee's hard work.

    Just like Wee KHAT Siong claim credit for the face mask that was the good work of the previous government.

    Economic stimulus package to proceed on date to be announced by Interim PM - Guan Eng

    By Bernama - February 25, 2020 @ 5:14pm

    KUALA LUMPUR: Tun Dr Mahathir Mohamad has indicated that the economic stimulus package will go ahead on a date to be announced by him in his capacity as the interim Prime Minister, said former finance minister Lim Guan Eng.

    The plan, initially scheduled to be announced on Thursday, Feb 27, was among the issues that Lim discussed with Dr Mahathir this morning.

    “I had met up with Dr Mahathir in the morning in his office to discuss political developments. Among the issues that happened to be discussed was the economic stimulus package that was planned to be announced by Dr Mahathir to react to the adverse global economic impact to Malaysia caused by the COVID-19 outbreak,” he said in a statement today.

    Lim, who is the DAP Secretary-General and Member of Parliament for Bagan, said the Finance Ministry had finalised the economic stimulus package on Sunday, Feb 23 – his last full day as finance minister – to be presented to Dr Mahathir for his approval on the following day.

    However, Dr Mahathir submitted his resignation as the seventh premier yesterday. The Yang di-Pertuan Agong Al-Sultan Abdullah Ri’ayatuddin Al-Mustafa Billah Shah, who accepted the resignation, reappointed Dr Mahathir as the country’s interim Prime Minister later in the day.

    Stimulus package will ease businesses' cash flow burden - Azmin

    Published 27 Feb 2020

    The measures that will be taken through the economic stimulus package announced by Interim Prime Minister Dr Mahathir Mohamad are expected to ease the cash flow burden of affected businesses and individuals, particularly in the tourism and export sectors.

    In a joint statement today, Gombak MP Mohamed Azmin Ali and 10 MPs who exited PKR recently, opined that measures such as deferment of income tax instalment payments, provision of temporary discounts, loan assistance, and gift of one-off payment and special allowance would certainly lighten the burden for those in need.

    “Besides that, the implementation by the government as well as financial institutions proactively and continuously will not only guarantee that the assistance to businesses and households involved are effective, the stimulus package will also strengthen the country’s economic fundamentals to promote quality investments.

    “We are confident the government’s efforts will restore the confidence of the business community and investors on the nation's economy, as well as trigger new growth in facing critical challenges from the global economic scenario and impact from Covid-19,” he said.

  3. The Economic Action Council is making stupid and downright dangerous decisions.

    Was there any consultation with other ministries like Human Resources or is the EAC making Hail Mary, hope this works unilateral decisions?

    Cabinet should be meeting EVERY DAY (complying with social distance, everyone sit in different rooms ha ha ha) but instead they are taking MCO as excuse to goyang kaki makan angin. Malaysian Parliament postponed till May while in other countries their leadership are working 7 days a week.

    This decision by Bank Negara, under instruction of EAC, will cost countless banking jobs, NUBE was not consulted and will protest LOUDLY.

    Menteri Cap Buruh, please add banking jobs to the MAS and AA jobs that will be lost soon. Will you order the banks not to lay off anyone and force them to pay full salaries....? Ha ha ha poor Saravanan wanted to be Minister so bad so now he got Cap Buruh he has gone into hiding....

    Bank share price will collapse.....

    Banking customers, including individuals and small and medium sized enterprises (SMEs) will be allowed to delay the repayment of their existing loans, including mortgages and hire-purchases, for a period of six months.

    This is part of the central bank’s new measures to assist borrowers experiencing temporary financial constraints due to the Covid-19 outbreak.

    In a letter to the heads of financial institutions today, Bank Negara said the automatic moratorium will be effective from April 1.

    "Banking institutions should provide individuals and SME borrowers with adequate information on how the suspended loan/financing repayments/payments will be treated during the moratorium period," the central bank said.

    The automatic moratorium is applicable to ringgit-denominated loans or financing that are not in arrears exceeding 90 days as at April 1, 2020.

    The moratorium does not apply to credit card balances.

  4. Can Bank Negara order the Ah Longs to give moratorium too? All those who have borrowed from Ah Longs please make polis report. Let Bank Negara know who the Ah Longs are.

  5. Menteri Rumah dan Menteri Cap Burun, pay attention, 67% of these 2.4 million will be the unskilled and foreign workers. They don't have EPF.

    How else will they feed themselves and their families?

    Answer: crime

  6. Yes the best suggestion is to bring back GST. Fair to all, tax everyone, rich and poor, even the 2.4 million jobless.

    Don't set at 4%, because that is only revenue neutral, same as PH's SST. Why re-introduce when it has no benefit and does no better? To offset loss of oil revenue set at 20%

    And why wait till 2021 Budget? We desperately need tax revenue now. PH killed GST within months of GE14. PN must be faster. Table the re-activation of GST Act at the next Parliament sitting, implement immediately after.

    Go On, Just Do It.

  7. The new PN "government" has so far not done any work at all, any cabinet meetings? Parliament suspended.

    Bung Moktar enjoying the break relaxing in his swimming pool at home.

    While 2.4 million people will soon lose their jobs.

    So why should we pay the PN ministers any salary?

  8. Moo needs to call back Parliament to present a revised Budget. Bring out the big bazooka.
    The US is looking at pumping in $ 2 trillion into its economy.
    On the scale of Malaysia's economy, we will need easily RM 100 Billion to support.
    Provide liquidity to employers, on condition they keep workers on the payroll.Support the large casual and informal sector.

    Moo needs to talk to Mahathir and Anwar to get their support. Put politics aside, this is a rescue mission for Malaysia.

  9. cant we just send back all expat n foreign labour?