by Ranjit Singh
THE Covid-19 pandemic which has caused great loss to the country on the health front has also had devastating effects on the economy. During the Movement Control Order (MCO) period from March 18 to April 28, many businesses could not operate and as a result had to undertake retrenchments.
The Department of Statistics Malaysia (DOSM) released its employment data for February yesterday, which showed that unemployment had spiked marginally in February to 3.3% compared to 3.2% in the previous month. However, these figures do not factor in unemployment caused by the Covid-19 outbreak which began to spread rapidly in March.
Economists have deemed unemployment of around 3% as full employment and Malaysia’s highest unemployment rate on record was in 1999 in the aftermath of the Asian financial crisis when it hit 4.5%.
The Covid-19 pandemic had caused disruptions to external and domestic demand. This in turn affected supply chains and many SMEs do not have the financial muscle to weather the downturn. SMEs represent 98.5% of businesses in the country and employ 40% of the workforce.
The Malaysian Institute of Economic Research (MIER) in an earlier report had projected that around 2.4 million Malaysians would lose their jobs due to Covid-19, representing 15% of the workforce.
Dr Yeah Kim Leng, professor at Sunway University and deputy president of the Malaysian Economic Association (MEA), told FocusM that the unemployment situation in the country this year would be made worse by the number of graduates joining the workforce for the first time.
“Like industrial production and sales numbers, February is likely the last of the good or normal months. We expect an uptick in unemployment in March due to the hiring freeze by Malaysian companies as the Covid-19 outbreak in China began to hit global supply chains. More job losses are expected in April when the MCO is in effect for the entire month.
“The rising unemployment will likely continue throughout the remaining months. A projected 100-200 thousand job losses will raise the unemployment rate to 4.0-4.6% by year-end. About half a million young people join the labour force each year.
“With job growth likely to be weak, the new job entrants could push the unemployment rate closer to 6%,” said Yeah.
Earlier this month, Bank Negara warned that the country’s unemployment in 2020 could rise to 4% or 629,000 individuals.
Dr Afzanizam Abdul Rashid, chief economist at Bank Islam Bhd, told FocusM that he expects the unemployment rate for this year to spike to 4.9% this year.
“We foresee the number of unemployed rising following the MCO measures as the country is currently grappling with Covid-19 pandemic. The IMF has forecast that Malaysia’s unemployment rate would go up to 4.9% this year as the economy is expected to go into recession in 2020.
“We should see the unemployment rate starting to increase in March onwards as MCO measures instituted from March 18 kicked in,” said Afzanizam
However, he is positive that while the unemployment rate would stay elevated through much of the year, it would taper off in 4Q20.
“That is when the economy would possibly start to be fully operational,” he said. – April 15, 2020
