Can Malaysia cope with a ‘triple whammy’ economic shock?
- Analysts say the country is facing the combined threat of a global recession, plunging domestic demand and collapsing oil prices
- The Muhyiddin administration is also bound by internal fiscal rules that limit its ability to roll out further stimulus measures
Government data released on Friday showed the unemployment rate in Southeast Asia’s third-largest economy rose to 3.9 per cent in March – the highest rate since 2010, and a 17.1 per cent jump from a year ago. Expectations are that the figure will continue to surge.
While none of the world’s economies are expected to be spared economic pain in the coming months as crimped domestic demand and the global recession begin to bite, analysts said Malaysia could be among the countries hit by a “triple whammy” due to a third factor applicable to energy exporters – the collapse in oil prices.
Mustapa Mohamed, one of Prime Minister Muhyiddin Yassin’s economic tsars, last week said the government had brought forward its lockdown-easing plans in a bid to jump-start the economy. Internal projections had shown the number of unemployed people in the country could triple to 1.8 million in the coming months, the economic affairs minister said.
While the government’s latest GDP forecast is for growth this year of between -2 per cent and 0.5 per cent, many others have offered a far grimmer prognosis.
In a commentary last week, Mohamed Faiz Nagutha, the Asean economist for Bank of America Merrill Lynch, said the bank was now forecasting that Malaysia’s GDP would contract by an eye-watering 8 per cent this year. If that materialises, the current downturn would be worse than the 7.4 per cent contraction the country endured in 1998 during the Asian financial crisis.