RM150b dent in economy
PETALING JAYA: The impact of the Covid-19 pandemic on Malaysia has been significant. Early estimates put the economic losses at RM150 billion, and that is not even counting the job losses and opportunities squandered.
Even sportsmen and their fans as well as entertainers and music junkies have not been spared. Numerous athletic and entertainment events have been cancelled in the name of protecting public health.
The setbacks have been inevitable. Along with the movement control order (MCO), borders were closed, thereby curtailing exports. For a trading nation like Malaysia, this will have significant impact on revenue.
Domestic spending has also declined as people tighten their purse strings in response to pay cuts and job losses.
The drop in oil prices and decline in tax collections added to the gloom.
Dr Yeah Kim Leng, professor of economics at Sunway University Business School, estimated the loss in national income during the movement restrictions at RM100 million to RM150 million, or 7% to 10% of the gross domestic product (GDP).
Malaysian Employers Federation (MEF) executive director Datuk Shamsuddin Bardan estimated that businesses have seen an average drop of 60% in their revenue.
“Even those what are doing better will see a 40% decline in income,” he told theSun yesterday.
He said even under the recovery movement control order businesses are still not running at full speed yet. “For those manufacturing products for the domestic market, demand has yet to pick up,” he added.
He said the worst hit are the tourism and travel industries, bringing hotels and airlines to their knees.
Also reeling from the impact are retail, food and education, given that schools and institutions of higher learning have not been allowed to operate.
This will have an impact on next year’s budget, according to Yeah and another economist Prof Dr Hoo Ke Ping.
Yeah noted that since billions has already been spent on the various stimulus packages and some direct taxes have been lowered, there will be less money to spend in 2021.
“Expect to see the allocation reduced to below RM290 billion,” he said.
“Before its exit, the Pakatan Harapan government had allocated RM297 billion for Budget 2020.”
Hoo expects the fiscal deficit to rise to about 5%, and that will force the government to cut down on expenses and try to raise revenue.
He expects a 6% reduction in the budget allocation.
However, despite the losses in revenue, Hoo said it is not all doom and gloom for Malaysia, with the economy expected to recover and record a surplus by the end of the year.
He said this is based on the improvement of the stock market, both domestically and globally, which he said reflects the economic performance of a country to a certain degree.
“Domestically, businesses have also resumed operations, and more importantly, we will see exports growth in the coming weeks and months, as other international markets reopen,” Hoo added.