The Covid-19 pandemic is taking a toll on economies the world over. Social distancing, lock-downs and disruptions to supply chains are now becoming a major burden to citizens, businesses and governments alike. A recent report from Ernst & Young, entitled “Economic impact of Covid-19: A Malaysian context” aims to give a Malaysian-centric focus on the current crisis.

Its Dire Straits For Now

According to the Malaysian Institute Of Economic Research, in a press statement on 24th  March 2020, it predicts the real GDP growth of Malaysia in 2020 will drop from 4.0 percent to -2.9 percent, with up to 2.4 million job losses, of which 67 percent will be from the unskilled workers category. Bank Negara Malaysia (BNM) projects Malaysia’s GDP growth to range between -2.0 percent to 0.5 percent in 2020. These are mainly attributed to output losses as a result of the Covid-19 pandemic, along with the implementation of the Movement Control Order and commodity supply disruptions both domestically and internationally. Nonetheless, BNM believes that the financial system will continue to remain resilient even under adverse economic scenarios. The stimulus measures, policy rate cuts, continued progress of public projects and higher public sector expenditure will go a long way to ease the pain.

The Potential Socio-Economic Impacts

In Malaysia, there will be direct sectoral impact to industries such as air travel, tourism and hospitality. A drop in foreign trade as supply chains affected by government orders will also be a factor. Stock markets are also going to take a hit with reduced investor and customer confidence. The reduced consumer spending due to the implementation of the MCO by the government is also going to be a problem. With cash-flow issues arising from the MCO, it can also lead to permanent or temporary layoffs too. Ultimately, this could lead to further reduced domestic demand and spending that arises from unemployment.  Tourism and hospitality will definitely be the hardest hit areas of the Malaysian economy. Followed by aviation and logistics, Oil & Gas and Agriculture.

The Case For Policy Interventions 

The total PRIHATIN economic stimulus package worth RM 260 billion (USD$59b) unveiled by the government, as of 6th April 2020, covers ‘rakyat-centric’, business support and economic strengtheners. RM 128 billion (USD $29 billion) was allocated for the people, RM 110 billion (USD$ 25 billion) to support all businesses and RM 2 billion (USD$ 0.5 billion ) as economic strengtheners. An additional RM 30 billion (USD$ 6.5 billion) was allocated as well to beef up the fund and ensure sustainability and economic growth too.

The Resilient Enterprise

The report focuses on the ‘resilient enterprise’ paradigm, where countries have to ‘put people first’, ‘protect business continuity’, ‘build and secure liquidity’ and ‘engage stakeholders’ too. With remote working becoming the new standard, companies need to set clear expectations for employees and impress upon them to maintain an open mindset to a fluid situation. Everyone’s safety, health, well-being, care and job security becomes immediate priorities.

It’s Time To Be Human

We all need to be ‘extraordinarily human’, practice empathy, communicate regularly, build trust and share experiences with each other too. In commercial terms, building a resilient supply chain is key to mitigating economic risks as well. Companies need to monitor, assess their risks, plan for contingencies, diversify their supplier networks. Institutions need to understand that stakeholder engagement is more important than ever. Everyone in Malaysia needs to understand the long-term view of the financial and operational impacts to truly grasp the importance of these trying times.

Source: Ernst & Young

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