2.

1 Impact to the Malaysian Economy

The news Coronavirus Disease or COVID-19 had shocked the world across
continents. The first case reported was in Wuhan, China that caused their citizens to die
from it and led all countries to panick.It took an immediate response from World Health
Organization (WHO) to issue an official statement before they came out with
standardized guidelines across the countries. The role of the government in every
country has been challenging to confront this new pandemic because one wrong
decision will led their nations to face the consequences. The history was recorded in
2020 when the world faced greater impact due to this pandemic not only to health,
socials but also greatly affected in economy. To combat the growing spread and
terrifying health threat of COVID-19, the government was forced to quickly implement
the Movement Control Order (MCO). The necessary lockdown measures slowed the
country’s economic growth and had a negative impact on many industries, businesses,
and households. The government has since announced a number of stimulus packages
aimed at securing and recovering the economy from the pandemic’s effects. The
stimulus packages were designed to benefit both consumers (on the demand side) and
producers (on the supply side). Not only are people suffering as a result of this tragedy,
but the economy is also suffering as a result of it, with countries imposing lockdowns or
movement control orders (MCO), resulting in a severe economic impact on the global
supply chain, bankruptcies, plummeting stock markets, and unemployment. Overall, it
had slowly destroying the economy world including in Malaysia. So, how COVID-19
affect the Malaysian Economy in term of its various key sectors, exchange rate, stock
market, and what are the government actions to mitigate economics losses?

First sector to suffer the most is tourism. Travellers will be forced to postpone their
trip and cancel hotel also flight reservations which will be huge loss for Malaysia, which
was the ranked 3rd most popular Asian travel destination in 2018. As a result, the
country’s Gross Domestic Product (GDP) will fall because fewer services and goods can
be produced. Furthermore, an increase in unemployment as a result of employee
retrenchment by some companies will reduce net income and thus Gross Domestic
Product (GDP). As a result, the tourism industry suffered a significant loss. This is
particularly true in the airline and hotel industries. So, many hotels were forced to close,
either temporarily or permanently. Furthermore, travel bans and falling demand around

1
the world have put the airline industry on the verge of bankruptcy. As a result, Malaysia’s
largest airlines, Air Asia and Malaysia Airlines, have implemented wage cuts as well as
unpaid leave, depending on income range and position. Besides that, many tour guides
are struggling to cope with unemployment as a result of the coronavirus, which has
resulted in a lack of tourists and tours. In fact, Malaysia’s Ministry of Tourism before has
focused on domestic tourism and promoting the country as a safe vacation destination in
order to strengthen the tourism industry. Moreover, several incentives and discounts for
domestic tourism have been implemented to encourage people to explore their own
states. Below shows tourist arrival and receipts to Malaysia by year according to the
statistics by Malaysian Tourism:

TOURISTS ARRIVAL AND RECEIPTS TO MALAYSIA BY YEAR

SOURCE: https://www.tourism.gov.my/statistics

According to (Uzir, 2019), the tourism industry contributed 15.2% of Malaysia’s GDP
in 2019, up from 14.6% in 2018. The Malaysian Ministry of Tourism, Art and Culture
launched the Malaysia integrated Plan 2018-2020 ( Tourism Malaysia 2018) to further
promise Malaysia’s extensive tourism offering and increase tourist arrivals and receipts.
Tourism revenue contributed RM 12 million ( 4.2 percent of GDP) to Malaysia’s
economy. The tourism industry is one of Malaysia’s largest employers, employing 3.1
million people, or 9.5% of the total workforce. The National Tourism Development Plan,
which aimed to increase tourist arrivals in Malaysia, had met its objectives resulting in an
increase in the tourist numbers before the COVID 19 Pandemic struck. Moreover, there

2
were drops in certain years as a result of both internal and external environmental
issues.

Next, According to Nottingham article, the impacts of COVID -19 on Malaysia’s

economy can be seen in the country’s high unemployment rate and the Malaysian
Ringgit’s depreciation against the US dollar. Malaysia’s unemployment rate in 2019 is
3.3%, which translates to 508,200 people. The COVID-19 pandemic has had a
significant impact on Malaysia’s economy. This can be demonstrated by comparing
Malaysia’s unemployment rate. The unemployment rate is 3.2% in January 2020, but it
will continue to rise until May 2020 and reaches 5.3%. This is shown in Figure one
below. There is not good phenomenon because it is negative trends in the labour
demand (Shankar, 2020). Below shows of Malaysia unemployment rate from 2008 to
May 2020:

Source: Department Of Statistics Malaysia

The foreign exchange rate, on the other hand, can determine the relative’s level of
economic health. This is due to the fact the foreign exchange rate has a significant
impact on a country’s level of trade. Malaysia’s exchange rate for March 2019 is RM
4.08 per USD, and it has depreciated to RM 4.26 per USD in July 2020. This is shown in
Figure 2 below. As the cost of imported raw materials rises, weaker exchange rates will
cause cost-push inflation. This will have an impact on almost all sectors in Malaysia,
particularly the manufacturing sector, because the majority of machineries are imported
from China and Japan. As more Malaysian Ringgit is spent, the purchasing power of the
Malaysian Ringgit suffers.

3
Figure 2: Malaysia/United States Foreign Exchange Rate

It is widely acknowledged that the tourism sector in Malaysia contributes significantly

to economic growth by encouraging foreign spending on Malaysian goods and services.
If the number of tourists continues to fall, some businesses in the tourism industry will be
forced to close due to unsustainable losses and inability to pay worker’s salaries. At the
same time, other non-essential sectors were forced to shut down during the MCO. For
examples, economic activity in the manufacturing and construction sectors was halted to
control the spread of COVID-19 in Malaysia. That is why government financial
assistance to affected sectors is critical.

Next, COVID-19 also had huge impact on the value of ringgit in Malaysia. As a result
of panic selling by investors they are seeking to avoid trading in the current volatile
market. The decline in Malaysian tourism and the drop in global crude oil prices will
reduce demand for the ringgit, causing its value to fall. According to the Taylor University
article, as of March 27, 2020, Malaysia’s stock exchange, Bursa Malaysia, had fallen to
its lowest level in 10 years, falling by a staggering 20.52% since the beginning of 2020.
This is due to panic sellers selling their shares in anticipation of rising volatility in stock
markets as a result of the pandemic. Airlines’ stocks had falling by around 39%as of
March 27, 2020. On the hand, with the widespread knowledge of avoiding any contact
with your bare hands as a result of COVID-19, glove manufacturing stocks have thrived,

4
with stocks such as Top Glove, the world’s largest glove manufacturer, performing
particularly well.

In addition to that, it had also greatly affected the population’s health. The emergence
of the COVID-19 virus has affected the socioeconomics of a country because it can
affect the health of the population of a country. This virus, which is said to be caused by
the consumption of wild animal food such as snakes, bats and lizards, has caused a
person to experience symptoms such as cough, flu and which persist for more than 14 to
21 days and can be fatal. In Malaysia, the preparedness of the authorities in dealing with
this issue is at the highest level to face any possibility of a sudden increase in cases.
The implication is that the country’s socioeconomics will experience a deficit due to an
unhealthy workforce and will have to under go treatment for recovery.

Next, this pandemic had damaged the country’s peace and stability. The spread of the
COVID-19 virus is said to be affecting the country’s socioeconomics because it has
threatened a country’s stability and created an atmosphere of panic for people all over
the world. According to Tedros Adhanom Ghebreyesus, Director General of the World
Health Organization (WHO), the COVID-19 virus has now entered the pandemic phase,
emphasising the spread and severity of the epidemic. In general, a pandemic is a
disease that spreads rapidly across the globe, if not the entire globe. From the various
perspectives, the spread of COVID-19 can also have an impact on a country’s economy.
This is because when people in a country are identified as being infected with this virus,
the government will provide the best possible assistance in combating the problem. The
economic flow of a country will undoubtedly be challenged and collapsed as a result of a
lack of confidence among investors or tourists in the country threatened by this virus.
According to the Malaysian Ministry of Tourism, many foreign tourists decided to cancel
their vacations to our country due to concerns about the spread of this virus. In fact, low-
cost carriers such as AirAsia had to bear losses due to the cancellation of holiday flights
to countries at risk of COVID-19. There is no denying that the emergence of COVID-19
has had negative implications for the economy of a country.

Last but not least, it also put Malaysia to bear high medical costs and subsidy for the
citizens. The spread of COVID-19 had given impact to the country’s socioeconomics
through the increment of the medical and preventive costs that the government must
bear especially when we need to get the vaccines produced by powerful countries. As

5
the COVID-19 virus is new, the government is being forced to spend a lot of money on
prevention and treatment for infected patients. Expertise and a wide range of high-tech
equipment are required to detect and prevent the spread of this virus. As a result, a large
amount of state money had to be spent in an effort to curb this problem in order to
preserve people’s well-being and the country’s economic stability.

Finally, the emergence of the COVID-19 virus has made us, and the world, more
aware of the importance of hygiene care in daily life practices that are emphasised in
every religion. Contradictions in daily practises that violate all religious prohibitions, such
as eating wild animals, should be used as a backup to ensure that we do not make a
mistake. Indeed, as creatures passing through this world, we should be grateful for the
blessings He has bestowed upon us. As a result, let this be a lesson to all of us to
improve our weaknesses so that they do not reoccur. Let us all work together to
emphasise the importance of hygiene in the fight against the COVID-19 virus.

6
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https://www.worldscientific.com/doi/10.1142/9789811228476_0004

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AOvVaw1r WGBLRkHrcp7JP06ASWxM

Retrieved December 17, 2022 from https://college.taylors.edu.my/en/life-at-taylors/news-

events/news/how-covid-19-affects- the-malaysian-economy.html

Retrieved December 18, 2022 from https://www.tourism.gov.my/statistics