Nama Kos / Kod:

PRINCIPLES OF ECONOMICS / UFC 1002

Tajuk:

KESAN EKONOMI PENDAMIK COVID 19 DI MALAYSIA

Tarikh:

14 November 2021
 INTRODUCTION
The novel coronavirus (Covid-19) earlier was referred to as a novel coronavirus, a severe

acute coronavirus syndrome (SARS-COV-2). The COVID-19 outbreak started in Wuhan,

Hubei Province, China and quickly spread to almost all the countries. The World Health

Organization (WHO) had officially declared COVID-19 as a global pandemic. The report

showed that 223 countries and territories of the world had recorded a total of 248,000,739

confirmed cases of the Covid-19 and the death toll of 5,023,945 deaths, while Malaysia

has recorded 347,972,685 confirmed cases and 2,975 deaths ( Worldmeter, Tuesday,

November 2 ,2021)

Covid-19 pendemic which threatens the existence of business and economy. In

May 2020, unemployment rose by 5.3 per cent after the first lockdown in March 2020

had a severe impact on Malaysia’s economy. The economy picked up as the year

progressed by January 2021, the unemployment rate dropped to 4.9 per cent but those

gains were scupper by elections in East Malaysia. This was followed by the lax

observance of standard operating procedures during the month of Ramadan, requiring a

strict Movement Control Order (MCO) to be extended from 1 to 28 June 2020.

Up to two million jobs could be lost in 2021. Although the government has

provided wage subsidies, cash handouts for the most disadvantaged and support for small

and medium-sized enterprises, these outlays have put further stress on an

already weakened fiscal position that has borne the brunt of the 1MDB scandal. A series

of support initiatives Penjana, Prihatin, Permai, Permerkasa, Permerkasa and Pemulih

have been extended by the government, totaling RM380 billion (US$90 billion).
 The massive lockdowns and restrictions imposed worldwide to control the

pendemic were no doubt necessary, but the lesson learned will need to be unpacked and

deliberated so that the world can be better prepared to combat such crises in future.

Here, the initial pause refers to the temporary industry shutdowns that economies

across the globe encountered when COVID-19 was declared as a pendemic by the World

Health Organization and it was during this shutdown that governments around the world

limited the opening of the economy to only the industries that provide essential goods

(eg: grocery retailers) and services (eg: healthcare and logistics providers). The initial

pause was nonetheless quick, as governments reopened the economies gradually with

new social practices (eg: femote work, physical distancing, visitor records) being

enforced, thereby leading to a reconfiguration of how economic activities can be carried

out during the pendemic.

external factors (global supply and demand shocks) and domestic factors (MCO).

Critically, this will disproportionately impact smaller businesses and vulnerable groups

such as lower-income individuals and workers.

When the first MCO was imposed in March 2020, strict stay-home directives saw

GDP bleed RM2.4 billion a day, and the government eventually spent RM55 billion

across the year to ease the fallout. Malaysia's economy shrank 5.6 per cent last year, its

worst decline since the 1998 Asian financial crisis. But while unveiling a RM40 billion

aid package on Monday night, hours before the lockdown took effect, Tan Sri Muhyiddin

(former Prime Minister) admitted that "the government has limited fiscal space to spend

at this moment" which resulted in the "Pemerkasa Plus" involving a meagre RM5 billions

of actual spending from state coffers.

Indeed, as vaccination rates surge, some industries are beginning to see the light at

the end of the tunnel, but for many others, recovery still remains elusive. This summary

aims to illustrate the economic impacts experienced by several industries as well as some

limitations of current policies.

Retail

Arbitrary distinctions between “essential” and “non-essential” sectors is hurting the

Malaysian economy further. Essential sectors could be a hotbed for high-risk

transmission, while other non-essential sectors have seen a gradual decline in their rate of

transmission, especially for those following strict SOPs. For example, the retail sector
saw its worst performance (-16.3% in 2020) since the Asian Financial Crisis in 1998 (-

20.0%) with the fashion/apparel sub-sector registering the worst decline (-49.6% in Q4

2020), followed by department stores (-44.7%).

Creative Industry

Another sector that has been paralyzed by lockdowns is the creative industry (from visual

arts to live performances). Most mediums of art function by connecting the audience to

the artwork/artists in the same location – usually involving social interaction.

Travel and Tourism

AirAsia has retrenched 2,400 employees and is flying only 8% of its Malaysian routes

whereas Malaysia Airlines has left over 13,000 employees on unpaid leave. Malaysian

Association of Hotels (MAH) have claimed that MCO 3.0 has left 61.13% of workers on

unpaid leave. According to MAH, only 70% of hotels are still operational with

average occupancy rates below 20%. Aviation has lost RM13 billion in 2020 while hotels

have lost RM11.3 billion since 2020, without any clear signs of recovery.

Agriculture and Fisheries

Zooming in on aquaculture and fisheries, low consumer demand due to dine-in

restrictions and seafood restaurant closures have caused seafood prices to drop and stock

pile-ups. Demand for higher-value fishes like groupers and Spanish mackerels – often

enjoyed in restaurants and by tourists, are affected the most. With the income from

fishing barely enough to cover the costs, Malaysia Inshore Fishermen Action Network

(JARING) raised the concern that fishermen may not go out fishing anymore to avoid

losses. MIDA reported a 33.3% job loss in fisheries impacting the lives of many

fishermen who were already considered lower-income groups in the first place.
 Why has the effect varied across industries? Lockdown rules and social distancing

requirements have affected sales for some firms more than others (mostly negatively, but

positively for some firms). There are large differences in the ability of workers to work

from home, due both to the type of business and limitations on employees for example,

workers with children may struggle to work productively while also home schooling.

Based on growth, the level of economic value in this quarter remained lower than

the pre-pandemic level of fourth quarter 2019. In terms of monthly GDP performance,

April and May rose to 40.1 per cent and 19.8 per cent respectively. As for June, GDP

dropped 4.4 per cent influenced by a total lockdown nationwide with tightened Standard

Operating Procedure (SOP) and only essential services were allowed to operate. Hence,

Malaysia’s economy grew by 7.1 per cent in the first half of 2021 (1H 2020: -8.4%)

Strategic economic suggestions to recover

existing businesses and net new creation. Malaysia’s immediate priority must focus on

the efficient and sustained management of the ongoing pandemic and its effects on

individuals, households, and firms. Protecting the lives and health of citizens - and

thereby preventing further strains on the country’s health system - is vital to ensure a safe

resumption of economic activities and a prevention of a more protracted economic

downturn. However, each is likely to evaluate and deploy a combination of the following

interventions to support economic recovery.

1) Increasing Investment

 Providing direct capital injections through investments, loans and grants.

 Injecting capital into the banking system to spur investment.

 Increasing activity through public–private partnership structures

 Attracting incoming foreign direct investment (FDI) and stemming the loss of

outgoing FDI

2) Increasing Revenue

 Increasing direct government spending on public-use assets, such as heavy

infrastructure, facilities and climate retrofitting.

 Promoting domestic spending on domestically produced goods and services

through tax-rebate checks, stimulus checks, low interest rates and/or increased

tariffs on imports.

 Encouraging spending from international markets through renegotiated or new

trade agreements.
3) Reducing Cost

 Reducing taxes on businesses and/or individuals.

 Providing concessions on government services (e.g., utilities).

4) Encouraging Innovation

 Serving as a convener across industries, academia, think tanks, and design

and development agencies.

 Creating a strong enabling environment (e.g., intellectual property

protections).

5) Supporting Workforce Readiness

 Facilitating upskilling and reskilling programs (e.g., for managerial skills,

digital platforms and new industry expertise).

On 27/10/2021, Prime Minister Datuk Seri Ismail Sabri Yaakob announced that

the banking sector would set up a Financial Management and Resilience Programme

(Urus) to help the B50 (bottom 50% income group). Under the 12th Malaysia Plan, the

country’s economy is expected to grow between 4.5% and 5.5% over the next five years.

When the economy fully reopens, a conducive and business-friendly environment is

crucial to ensuring that businesses can operate smoothly and without worrying that they

will run afoul of the law. To do this, standard operating procedures (SOPs) must be kept

to the minimum and simplified. Enforcement agencies, including local councils must also

be on the same page.

CONCLUSION
The pandemic has inflicted uneven impacts on each industry, ranging from critical

damage for many to positive growth for a select few. In many cases, one industry’s

decline leads to ‘spillover effects’ that affect related, smaller-scaled businesses. As a

quick example, cancelling live sports matches not only affects athletes, but the impact is

propagated to media broadcasters, venue providers, merchandise and food.

Additionally, intense amounts of political determination will be required. Some

policy responses may require the circumvention or amendment of certain laws via a

special or emergency parliamentary session (see: restrictions on government borrowing to

fund operational expenditures, and restrictions via the Employment Insurance System

Act). Lastly, there will be huge financial pressures on the banking sector,

demanding action from our monetary policymakers.

After all, the current COVID-19 crisis will eventually be conquered through

vigorous public health efforts, but without a sufficiently large and forceful fiscal

response, the economic scars it leaves behind will be viciously long-lasting. While it’s

hard to take major actions during this MCO period, we all have a role to play as a society

to help those affected by the economy and to keep holding onto hope that recovery is

right around the corner. The most important thing is always to remember to help those

around you by supporting local businesses and donating to those in need whenever and

however possible and I hope with COVID-19 Nasional Immunisation Programme we

will be living a normal life in the near future.

References
1) Ernst & Young

https://www.ey.com/en_my/take-5-business-alert/covid-19-impact-on-malaysian

businesses

2) The Edge News Malaysia https://www.theedgemarkets.com/searchresults?

keywords=impact%20of%20covid19%2 0to%20malaysia

%20economy&fromDate=1999-01-01&toDate=2021-10-24

3) Institute of Strategic and International Studies (ISIS) Malaysia

-https://www.isis.org.my/2020/03/26/covid-19-in-malaysia-economic-impacts-

fiscal-responses

4) Research for Social Advancement

https://refsa.org/how-has-covid-19-affected-malaysian-business-sectors/

5) Department of Statistics Malaysia

https://www.worldbank.org/en/country/malaysia/overview#1

6) Perlego.com

https://www.perlego.com/home

7) Worldmeter
https://www.worldometers.info/coronavirus/