KUALA LUMPUR, July 22 — Middle-class households will experience a disproportionate fall to their income levels due to the Covid-19 pandemic, according to Fitch Solutions Country Risk & Industry Research.

The Fitch Group unit cited official data to estimate that 210,000 households from the upper-middle income category (those with disposable incomes between US$25,000 and US$50,000) will slide down into the classes below due to the economic disruption caused by measures to contain the pandemic.

Pointing to its previous prediction of a 2.8-per cent contraction of the economy from 2019 and an expected spike in unemployment, Fitch Solutions also projected average disposable income for Malaysian households to shrink by 8 per cent, from RM102,460 last year to RM94,053 in 2020.

"The average Malaysian household will be squeezed by Covid-19 related lockdown measures, as well as the resultant economic crisis,” the research house said in a report released today.

In March, Prime Minister Tan Sri Muhyiddin Yassin announced an unprecedented movement control order (MCO) that effectively shut down most of the country to provide health authorities a chance to flatten the Covid-19 infection curve.

While the months-long restriction has been effective in containing the rate of infection, it came at a brutal cost to Malaysian workers and the local economy, which is set to contract for the first time since the 1997 Asian Financial Crisis.

However, Fitch Solutions projected that Malaysia would experience a strong and rapid recovery next year, which it credited in part to the government’s various stimulus efforts to mitigate the harm of the MCO on the country’s business activities.

It projected that the Malaysian economy would expand by 5.7 per cent in 2021 and that job losses arising from the MCO would be erased by 2022.

"Because of the before mentioned indicators, we foresee disposable incomes recovering to similar, pre-Covid-19 levels from 2021 onwards.”

Previously, another research outlet, IHS Markit Malaysia, also predicted that the country could experience a "V-shaped” recovery from the crisis, but warned that this could easily be derailed.

On Monday, Muhyiddin had to address the nation to warn Malaysians against complacency in the fight against Covid-19, after the country began registering new infection clusters that coincided with a lifting of restrictions.