THE risk of more job losses and salary cuts increases with a prolonged Movement Control Order (MCO) and any recovery could take at least 12 months, warned economists.
Grant Thornton Malaysia PLT country managing partner Datuk NK Jasani said the help from the government is not enough for businesses to survive during this period.
“What businesses need is income, despite the subsidies from the economic stimulus packages, deferring of Employees’ Provident Fund (EPF) payments or even six-month moratorium on loan repayments.
“This long MCO period is already showing serious detrimental effects on the consumption recovery trends and rakyat now fear and have real job losses and salary cuts.
“As mentioned earlier, EPF could certainly do more for the cashflow of employers and thereby preserving employment in these critical times,” he said in a statement.
Bank Negara Malaysia had also warned that unemployment this year could rise to 4%. Unemployment rate in 2009 after the global financial crisis was 3.7% and 3.2% during the Asian financial crisis of 1998.
Sunway University Business School economics Professor Dr Yeah Kim Leng forecasted a 5% to 6% or more unemployment rate this year.
“Given a steady increase in labour force of slightly over 2% annually due to the rise in the working age population, if there is no job creation this year, the country’s unemployment is projected to rise to more than 800,000 and push the unemployment rate from the present 3.3% to over 5%.
“Assuming a loss of 200,000 jobs this year, the unemployment rate would rise above 6% at the end of 2020,” he told The Malaysian Reserve (TMR).
Yeah said wage subsidy programmes need to be supplemented with other forms of assistance.
“The distressed firms, especially SMEs (small and medium enterprises) would need larger direct support such as the wage subsidy and quick access to the various financial reliefs.”
But retrenchment is not the only challenge. A survey by the Statistics Department released in April showed 46.6% of self-employed respondents were retrenched due to Covid- 19. Based on the survey conducted between March 23 and 31 this year, 23.8% employers also lost their jobs.
However, freelance designer Seyvaq Singh said it has been business as usual during the MCO.
“Many businesses closed off their operations entirely, but a lot decided to pivot immediately instead. A lot of work has been coming in from businesses shifting to new models that need new marketing material entirely.
“Yes, there was a slump in demand as soon as the MCO hit, but work has been picking up since then,” he told TMR.
Seyvaq said many businesses are realising the importance of design, copywriting and branding for the first time.
“A big fear is that as soon as the MCO lifts, people will have a skewed perception of freelancers and the industry will be damaged by that.
“A lot of people are out of a job right now and so are charging way below market value for their services and are taking any job that comes their way.”
The extended MCO is until May 12, but some economic sectors are allowed to operate fully starting yesterday after about seven weeks of stay-home order.
Jasani said delaying or deferring EPF payments will not solve the cashflow problems faced by many companies. He cited the closure of garment group Esquel Group Malaysia Sdn Bhd and said more businesses will follow suit.
The Department of Statistics Malaysia’s figures showed unemployment in February this year jumped to 3.3% compared to 3.2% in January 2020, with 525,200 people jobless.
Chief statistician Datuk Seri Mohd Uzir Mahidin said the February 2020 unemployment rate had yet to be affected by the internal shock caused by the Covid-19 pandemic. The impact, he said, will be seen in March’s figures.