Unemployment rate likely to surpass forecast amid 'severe' Covid-19 impact on Malaysia — BNM governor

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KUALA LUMPUR (May 13): Bank Negara governor Datuk Nor Shamsiah Mohd Yunus said today that the Covid-19 pandemic will "severely" affect the country's economic growth in the first half of this year — particularly the second quarter — given the sudden and almost complete halt in economic activities under the first three phases of the movement control order (MCO) from March 18 to the May 3.

And the unemployment rate will likely surpass the bank's earlier forecast of 4% — issued in April -- amid the extended MCO and weaker demand. In particular, business closures will result in unemployment rates spiking in April and May, she said.

Nevertheless, she said the country's economic growth to improve in the second half of the year, with growth accelerating in 2021, as trading partners resume economic activities.

She also pointed to health-related industries such as pharmaceuticals and medical supplies and equipment, which appeared to have been registering significant growths under the outbreak.

“Malaysia is the world leader in the manufacturing of medical gloves, supplying more than half of the global medical gloves. Another sector is electrical and electronics (E&E), the players are connected into the global technology value chain and are present in segments that facilitate remote work.

“We are connected to the supply chain in China, which is beginning to show signs of economic recovery. So, Malaysia is well-positioned to benefit from the global recovery,” she added.

Another structural shift includes the robustness of local logistics players, which is seen to help facilitate the boosting of online shopping and the central bank have already witnessed an increase in employment in retail delivery services.

Ride-hailing companies, she said, has also swiftly re-tooled their services to create online ordering and delivery platform for local food and beverage businesses who were previously not digitally connected, which has helped micro and small enterprises sustain themselves during the MCO.

She also noted that some companies have been taking advantage of the “new normal” by undertaking structural developments to accelerate the adoption of technologies, in line with social distancing measures, amid the coronavirus outbreak.

She stressed that companies need to come up with a long-term strategy that includes measures to adapt to and take advantage of the digitalisation trend, to ensure their sustainability and competitiveness.

With the expected recovery in economic activities in the second half of this year, the labour market should gradually improve in tandem, with rehiring and job creations in some sectors, she said, given the gradual lifting of MCO.

“The more vulnerable groups are from tourism-related and export-oriented manufacturing, and these industries account for 45% of local employment. Once the MCO is lifted, we will see improvement in employment to re-hiring in varying levels across different economic sectors,” Nor Shamsiah said.

The government, meanwhile, has undertaken several measures to safeguard jobs, mitigate income losses and develop human capital, in order to reduce the adverse effects of the Covid-19 onto the labour market, she said.

These include the Employment Insurance Scheme, Wage Subsidy Programme, Employment Retention Programme and Reskilling and Upskilling Initiatives.