PETALING JAYA,Aug 17: The government has been urged to focus on creating jobs and providing aid to the jobless as a means of countering sluggish consumer spending.
Two economists, speaking to FMT, said small enterprises, the food and beverage business and tourism should also receive attention.
Yeah Kim Leng, professor of economics at Sunway University, said the economy remains at a flat line caused by external factors and weak consumer spending. The tourism sector was worst hit while other sectors were slowly recovering but not rebounding fast enough, with weak foreign and local demand.
“It remains a question mark to see how fast SMEs will recover. This uncertainty is weighing down consumer spending as they are being cautious with their money,” he said.
A way to reverse this would be to ensure SMEs receive more aid from the government to move beyond survival to the recovery stage.
Last week, the statistics department revealed that Malaysia’s gross domestic product contracted 17.1% in the second quarter of the year, as a result of restrictions under the movement control order. The figure is the lowest since the financial crisis of 1998.
Another economist, Hoo Ke Ping, an adviser at Kingsley Strategic Institute, said the 17% contraction showed Malaysia’s economy had fared better than other countries which had faced up to 30% contraction.
“This 17% contraction is due to a lockdown earlier this year. That means even after being at our rock-bottom with almost all businesses closed and people’s movement restricted, our economy did not do that badly as compared to others,” he said.
Hoo said this was due to the stimulus packages introduced by the government, adding that Malaysia’s economy would rebound next year as the petrol prices increased to US$42 per barrel and palm oil prices went up by 25% compared to last year. He added that the demand from India was also helping thousands of oil palm smallholders to sell their produce overseas.
“We are also earning billions of ringgit from rubber glove products,” he said, adding that the electrical and electronics industry was also bouncing back.
As for the agriculture sector, Hoo said Malaysia has an available buyer, Singapore, which would ensure farmers continue to grow.
However, Hoo called on the government to help out food and beverage as well as tourism related industries as up to one million people from such industries were likely to be affected. He said Putrajaya needed to either provide training for work in other sectors or to offer welfare aid.
He suggested the government temporarily reduce some of the big scale development projects and instead channel that money to such groups as “it will have a multiplier effect on the one million people to the economy and to boost consumer spending”.
For those who lost their jobs or faced pay cuts, Hoo said the government has given flexibility to restructure loans to banks, adding “this will give breathing space to those who are unable to pay their loans”.
He added that Prime Minister Muhyiddin Yassin’s relationship with top leaders from the US, India, China and Singapore would also result in investments flowing into Malaysia.
On Aug 8, Finance Minister Tengku Zafrul Aziz said Malaysia’s economy was on the right track for a 2021 recovery, based on recent economic performance. The unemployment rate declined to 4.9% in June from a record high of 5.3% in May, which Zafrul said boded well for the country’s economy.