It's no doubt the pandemic has affected the Malaysian economy. Read on to learn how did COVID-19 affect the economy.
Since the beginning of time, the world has been rocked by a large number and variety of extremely infectious diseases that have managed to achieve the level of a pandemic. These include well-known ones such as the Spanish Flu, which killed 40 to 50 million people, and the Bubonic Plague, which killed around 200 million people. Thankfully, these outbreaks tend to occur less frequently in modern society.
However, every now and then a catastrophic outbreak does happen, and not many have reached the level of seriousness as the Novel Coronavirus — COVID-19. What started as a viral flu outbreak, has now become a global pandemic. Over 2 million people have been infected globally and over 140,000 lives have been lost. Not only are people suffering from this tragedy, the economy is also at its mercy, with countries imposing lockdowns or movement control orders (MCO), causing a severe economic impact on the global supply chain, bankruptcies, plummeting stock markets, and unemployment. Overall, it is destroying the world’s economies — one of them being Malaysia’s economy. After undertaking, extensive research, here is my opinion of how did COVID-19 affect the Malaysian economy in terms of its multiple key sectors, exchange rate, stock market, and the actions undertaken by the government to minimise economic losses.
First off, a variety of Malaysia’s key sectors are now in distress due to COVID-19. Some of these sectors include Malaysia’s manufacturing sector which, aside from getting hit with material disruptions due to the MCO, is facing a crisis in the manufacturing of commodities such as oil and gas by the global crude oil crisis which has caused oil prices to plummet this year.
Another sector is tourism which is expected to be hit the hardest. Travellers will be forced to postpone their trips and cancel hotel bookings as well as flight plans, which is a huge loss for Malaysia since it was ranked the 3rd most popular Asian travel destination in 2018. Therefore, this will lower the Gross Domestic Product (GDP) as fewer goods and services can be produced in the country.
Additionally, the increase in unemployment due to the retrenchment of employees by some companies will reduce the net income and thus, GDP as well.
COVID-19 will also have a huge impact on the value of ringgit in Malaysia as a result of investors who are panic selling to avoid trading in the current volatile market. The fall of tourism in Malaysia and the decline in global crude oil prices will reduce the demand for ringgit, causing its value to drop. As for Malaysia’s stock exchange, Bursa Malaysia had sunk to its lowest in the last 10 years, falling by a staggering 20.52% since the start of 2020, as of March 27, 2020. This is mostly due to panic sellers selling their shares in fear of the rising volatility stock markets will face due to the pandemic. Airline stocks in particular, which are part of the tourism sector, have been hit hard with AirAsia falling by around 63% and Malaysia airlines by around 39% as of March 27, 2020. On the other hand, with the common knowledge of avoiding any contact with your bare hands due to COVID-19, glove manufacturing stocks have prospered, with stocks such as Top Glove, the largest glove manufacturer in the world, rising by around 30% as of March 27, 2020.
Of course, Malaysia has developed countermeasures to prevent an economic collapse. These include three stimulus packages worth RM10 billion, RM20 billion, and RM230 billion each. Each of these serves specific purposes to help reduce the effects of COVID-19 on the economy by providing wage subsidies, discounts on commercial and domestic electricity consumption, tax exemptions and reliefs for domestic tourists, and much more.
As a matter of fact, some of these funds will be allocated to tertiary education students, who will have the benefit of receiving a one-off payment of RM200 as a form of compensation for the damage and inconvenience the outbreak has caused.
Nevertheless, I personally believe this money could have been better allocated to other sectors instead, such as the medical sector. This is not a relatively small sum and I believe other sectors need it more than we do in this time of crisis. However, Malaysia’s GDP growth is still expected to sink by around 3.7% amid COVID-19 in 2020 as compared to the 4.3% growth rate in 2019.
Overall, the effects of COVID-19 have had a devastating effect on the economy of Malaysia with an unimaginable amount of damage to the country and globally. But, the economy will eventually recover with Malaysia’s economic growth, thankfully, being expected to bounce back in 2021 by 4.5%. After all, like what Ghana’s president, Nana Addo Dankwa Akufo-Addo said, “We know what to do to bring our economy back to life. What we do not know how to do is to bring people back to life.”
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