KUALA LUMPUR (June 25): The World Bank has projected that Malaysia's unemployment rate will continue to rise as the economy experiences a sharp slowdown during the second quarter of the year.
In its Malaysia Economic Monitor report released today, the bank did not reveal a specific numerical projection for the unemployment rate in Malaysia.
However, World Bank Group lead economist Richard Record stressed that the shock to unemployment will be consistent with the slowdown in economic growth in the first quarter, and even worse during the expected economic contraction during the second quarter.
"I think it underscores the importance of response measures from the government to target those vulnerable households and help firms especially SMEs (small and medium enterprises) maintain employment during this crisis," he said during a virtual press conference after the report's launch.
Due to the Covid-19 pandemic, Malaysia's labour market felt the brunt of the government-imposed Movement Control Order (MCO), with unemployment in April spiking to 5%, the highest since 1990.
The Statistics Department has said that the number of unemployed persons went up 48.8% year-on-year to 778,800 in April.
World Bank Group senior economist Achim Schmillen, speaking at today's press conference, pointed out that it is not only important to look at unemployment but also underemployment.
He observed that a lot of workers may not have lost their jobs but are forced to work less hours or do work that does not maximise their human capital productive potential as much.
"So going forward, it's going to be important to move from this jobs crisis [management] to jobs recovery by continuing wage subsidies and perhaps focusing more on creating jobs instead of retaining jobs by doing more to match workers and jobs, strengthening employment services and investing in reskilling and upskilling," he said.
This, he added, is because the World Bank expects that many of the jobs that are going to be created in this new normal are going to be quite different than those that have been lost.
As such, Schmillen said the government should come up with proactive job policies to address the challenges that the country's labour market is facing due to the pandemic.
The World Bank has also projected Malaysia's economy to contract by 3.1% in 2020, due to a sharp slowdown in economic activity caused by the Covid-19 pandemic and lockdown measures to contain its spread.
It said a pronounced output contraction of around 10% in the second quarter is envisioned, reflecting the significant impact of the economic disruptions resulting from the MCO imposed during the quarter.