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When will Malaysia's economy recover?

As a result of the impact of the triple Black Swan events, there is a possibility that Malaysia will be experiencing a recession in 2020 with an estimated base case growth at -0.5% by World Bank, with Maybank Kim Eng projecting a -3.5% growth. However, no downturn will last for long. The deeper the drop in economic growth, the bigger the jump towards recovery.

A recent study by the International Strategy Institute, shared that a 2.9% contraction in GDP could result in an unemployment of 2.4 Million Malaysians, which is roughly 10% of the workforce.

There does not seem to be a strategy by the government on job creation, a high level of consumer debt, and adding to this, the resulting supply shock impact of the just ended oil crisis will adversely impact the government’s oil revenue. As a trading and exporting nation, Malaysia would not be immune to the drop in imports of non essential goods from major trading partners.

Many economists and analysts are projecting that Malaysia and the global economy will likely have a wider “U” shaped recovery, which, based on stimulus packages announced by major economies and progressively announced by the Perikatan Nasional Government, allows for a possible avoidance of an “L” shaped recovery.

Nonetheless, with major economies at different stages of control of the pandemic, it will take longer than expected for an economic reboot to take place. This along with an optimistic vaccine cure in 18 to 24 months time, with a curtailed credit ability of consumers will possibly skew the recovery curve towards an “L” shape scenario.

- Article by Izmir Mujab & Remakantan Nair

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