Experts foresee slowdown in several sectors
KUALA LUMPUR: Local economists have predicted the situation this year to be similar to that in 2015, which was riddled with retrenchment, price hikes and lower purchasing power. They believe the Covid-19 outbreak in Wuhan, China, will have a huge impact on Malaysia’s economy.
While the World Bank announced a slightly lower gross domestic product (GDP) growth target of 4.5 per cent this year, political analyst and veteran economist Professor Dr Hoo Ke Ping said the actual GDP could be as low as three per cent.
He described the GDP announced by the World Bank as “very optimistic” compared with the actual impact of China’s sluggish economy, especially on Malaysia’s tourism, oil and gas, and construction sectors.
“This year, we are looking at a growth that will be very similar to what we experienced in 2015, but the only difference is that this time, Malaysia may not experience a recession due to its diversified economic portfolios.
“One sector has started to feel the heat as we are seeing cancellation of hotel bookings and tours by tourists from China.
“This has caused the tourism industry to lose about half a billion ringgit in the first two months of this year.
“This makes up about 0.3 per cent in GDP losses,” said Hoo in justifying why he felt the World Bank was too optimistic about Malaysia’s economic growth.
Hoo said the tourism sector would take a longer time to recover as people would be fearful to travel even when the outbreak had been contained.
“The lack of visitors in Genting Resort is evidence that the worst will come in the next few months. Layoff or retrenchment is inevitable in the tourism sector.
“About two million people are employed in the tourism sector. I estimate at least 10 to 15 per cent may lose their jobs,” he said, adding that the domino effect would affect all quarters, including the banking sector.
He said Malaysia had yet to feel the impact of the Covid-19 outbreak since essential goods imported from China were still available, mostly last year’s stock.
“Once the stock runs out, we will start to experience shortage, which will increase the prices of items.
“It will cause countries like India to raise the prices of their exports such as onions,” Hoo said, describing China’s economy as volatile and would take time to recover.
However, Hoo believed Malaysia would not experience a recession because of its diversified economic portfolios.
Economist Professor Dr Mohd Nazari Ismail from Universiti Malaya’s Department of Business Strategy and Policy suggested a slowdown in most sectors, including aviation and tourism.
He said the aviation and tourism sectors would be worsthit and that the outbreak would slow down other businesses, too, as people lose their purchasing power.
However, Nazari said, the public could enjoy better promotions from hotels and tour agencies if they planned to travel.
“Perhaps not many will take up the offers because the Covid-19 outbreak is still spreading across the globe.”
Nazari said he did not see massive layoffs at the moment, but added that things might change if the outbreak prolonged.
“If this happens, we should be concerned.
“More people will be without jobs and debts will accumulate,” he said, adding that those with fewer financial commitments may not feel the pinch.
“The impact will be less harder on these people because they are self-sufficient,” he said, adding that Malaysians should brace themselves for the worst in the coming months.
At the launch of the “Practitioner’s Guide to Innovation Policy” report on Tuesday, World Bank Global Knowledge and Research Hub country manager (Malaysia) Dr Firas Raad had said a revision of Malaysia’s GDP was likely in light of the “evolving situation”.
“Malaysia is a trading nation. As China is one of the biggest trading partners, there would certainly be an impact, but its extent is still being examined,” he said.