Deidre Shannon Nair
No surprise here, Malaysia being in the midst of a political and health crisis has had its worst GDP quarterly contraction in history of 17.1%
While economic contractions are inevitable in any economic cycle, more so during a global health pandemic, the severity of the contractions spell one word for Malaysia : TROUBLE.
With most parts of the world being on lockdown for the second quarter, economic contractions aka a decline in the national output is a global issue.
According to World Bank forecasts, the global economy will shrink by 5.2% this year.
Malaysia vs Other Major ASEAN Countries
There’s no good way to say this – Malaysia’s GDP performance is suffering.
Indonesia, the Philippines and Singapore all registered smaller declines than us, with the exception being Vietnam who actually saw growth, albeit a weak one. (Table 1)
Table 1: Year-on-year GDP growth of major Asean economies
|Economies||First quarter GDP Growth||Second quarter GDP growth|
Has Perikatan Nasional been doing enough?
Sadly, no. The economic data shows the current government has failed to act fast enough to mitigate the recession. According to BNM, the government’s second quarter operating expenditure fell 2.1% from a year ago.
Simply put, if they had done more and spent more, we could have experienced a less drastic recession.
The unemployment rate of 4.9% in June hides the fact that there are many underpaid and underemployed professionals having to take just about any job to feed their families.
Here, the government must realize that the quality of employment is just as important as the quantity of jobs.
The government’s response to this has been unsatisfactory to say the least. Continuing in the same path of UMNO president Zahid Hamidi who in 2018, challenged the youth to take on dirty, dangerous, and difficult jobs and stop being so “fussy”, Malaysia’s Human Resource Ministry, Saravanan Murugan urged Malaysians to settle for low-paying jobs.
These types of insensitive comments says nothing of pay cuts and sacrifices many hardworking Malaysians have had to endure over the past few months. In fact, it is downright insulting as Malaysians were already being paid less than what they deserve before the pandemic hit.
As reported by the Department of Statistics Malaysia in April, 84% of private employees had suffered pay cuts. Bank Negara Malaysia also reported that during the second quarter, private wages fell by 5.6% from a year ago after rising 2.1% in the first quarter of 2020.
So, what can be done? The answer is simple, we need another stimulus package.
There is greater urgency for another round of RM45 billion economic stimulus package to prevent deflation, including financial aid to small and medium enterprises and extending the moratorium on bank loans by another 6 months when it expires on 30 September.
What will happen if PN doesn’t take things seriously?
Failure to do so will cause greater hardship and even bankruptcy as many will struggle to serve their borrowings, either for cars, homes or business purposes.
There is a real risk of deflation that could hurt Malaysian living standards. With an economic recession, prices should fall. In June 2020, the consumer price index (CPI) deflated by 1.9% year-on-year after decreasing by 2.9% in May.
The effects of an economic recession on a country is devastating. High unemployment leads to rise in crime, depression, and even suicide. PN needs to make a move now.