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KUALA LUMPUR, May 29 — The Department of Statistics Malaysia (DOSM) has predicted that the country is heading into an economic recession in the next four to six months.
In the Malaysian Economic Statistics Review (MESR), chief statistician Datuk Seri Mohd Uzir Mahidin said that their prediction was based on the latest leading Indicators and that dynamic measures are required to transform the current economic structure.
Currently, the nation’s economy is heavily dependent on commodities-based industries and low value-added industries hiring low-skilled and semi-skilled workers who are earning low wages.
“As a consequence, the share of Malaysia’s compensation of employees to the economy is relatively low compared to advanced economies.
“New ways of doing business and diversifying the economy is highly required by embracing technological advances such as the Industrial Revolution 4.0 and digitalisation of business ecosystem.
“With the adoption of new technologies, the business process will create a decent work environment and a more conducive and sustainable labour market,” said Mohd Uzir in the report.
Furthermore, he added that the disruption in labour demand for new graduates entering the market is expected in the second half of this year and it is vital to ensure that this group of people as well as those who are currently unemployed are occupied to restrain them from social unrest.
Mohd Uzir advised that a dedicated fund is required to upskill and reskill the two groups while enhancing their trainings on entrepreneurship and training in digital skills.
The country’s trade with its biggest trading partner, China, has taken a hit due to the Covid-19 outbreak which had disrupted the global supply chain — especially since China is a substantial supplier of industrial products to the rest of the world.
On a year-on-year basis, trade with China which represented 16 per cent of Malaysia’s total trade in the first quarter of 2020 (1Q20) was down by 2.1 per cent compared to the same period of 2019.
“Exports to China slipped by 1.3 per cent, mainly attributed to lower exports of electrical and electronic (E&E) products and liquefied natural gas (LNG).
“Imports from China contracted by 2.8 per cent mainly due to the decrease in imports of iron and steel bars, rods & et cetera and articles of apparel and clothing accessories,” said Mohd Uzir.
However, Malaysia’s trade with the US registered a strong trade in the first quarter as the Western superpower only recorded 100 confirmed cases in the first week of March 2020 before positive Covid-19 cases escalated there.
Merchandise trade with the US which contributed 9.6 per cent to Malaysia’s total trade registered a strong increase of 10.9 per cent compared to the same period last year.
Exports to the US rose by 9.5 per cent contributed by higher shipments of E&E products, timber and timber-based products and rubber gloves. Imports from the US increased by 12.8 per cent, supported mainly by higher imports of crude petroleum and aircraft & associated equipment and parts.
Company registration declining drastically, multiple sectors hit
At the same time, the report also revealed company registration has dropped by nearly four times in April when compared to March.
The data from the Companies Commission of Malaysia (CCM) recorded that only 895 new companies were registered as of April this year.
“Business registration during the same period fell by 90.3 per cent to 1,854. Meanwhile, for the Limited Liability Partnership (LLP), 38 businesses were registered in April compared to 242 in the previous month.
“The outbreak has caused the temporary closure of businesses, where they faced the risk of immediate cash flow constraints as their earnings decreased,” said Mohd Uzir.
He added that tourism industry was the first to be impacted with tourist numbers dwindling since January and tour packages being cancelled. This had the negative domino effect on the accommodations industry as well as the aviation industry as there was a decline in demand from travellers.
The pandemic has also brought the real estate industry to a halt, with a major impact on the retail segment as people will hold back from buying luxury properties during this tough times.
The review further predicted that due to the lack of confidence of the situation within the near future, coupled with the uncertainty upon the duration of the business shutdown; potential buyers are likely to wait-and-see, leading to the reduction of average sales in the first half of 2020.
Going digital is the new norm
As a result of the pandemic, digitalisation has become the way of choice for businesses to deal with the ongoing crisis. Mohd Uzir foresees that more new e-commerce ventures will emerge and that it will be the new norm of doing business.
He took note that the Ministry of Entrepreneur Development and Cooperatives (MEDAC) has initiated a programme to help SMEs during the MCO which is the INSKEN Bizlive.
The initiative provides the platform for the Economic Benefit Partnerships workshop for SMEs through webinars, programme training, industry-selected online mentoring sessions and assistance preparing documents for financial aid applications.
Touching on the education industry, the temporary closure of private educational centres across the country has motivated teachers to virtual learning sessions using the online platforms such as Google Classroom and Microsoft Teams for teaching purposes.
DOSM’s Wholesale and Retail Trade Census has also found that convenience stores, computer retail sales, security systems, perfumes and cosmetics and internet sales are among the emerging retail industries.
Meanwhile, the industries with high tendency to be obsolete are retail sales of petroleum, cooking gas, coal and firewood, music records, audio and video tapes and sales of rattan and woven goods.
“Interestingly, restrictions in place with the MCO, as well as general concern on health and hygiene will accelerate the growth of smaller grocery stores as the most preferred choice for customers due to shorter queues, ample parking spaces and closer to their respective homes,” observed Mohd Uzir.
