‘Cautious spending likely to continue until fears recede’

Yeah said that since the interest rate for savings deposits was low, people can explore higher yielding investment instruments such as fixed income funds and unit trusts in line with their risk appetites and profiles.

On May 5, Bank Negara slashed interest rates by 50 basis points to 2% which led to lower interest rates for savings accounts, fixed deposits and loans.

“More cautious spending and higher precautionary savings will likely continue until the Covid-19 fears recede and positive economic outlook prevails,” he added.

Universiti Malaya economics professor Prof Datuk Rajah Rasiah said Malaysia was currently facing a possible contraction in GDP – in the second quarter – and if this continues over the next quarter, the country will be in a recession.

“Unlike normal recessions, we are facing a very different crisis – one in which any attempt to kickstart the economy could result in a resumption of Covid-19 infections.”

In contrast to what most economists are predicting, which is a “V” recovery, Rajah believes that it is possible the country could face another wave of infections as predicted by some scientists.

“Hence, it is important that our efforts to open up the economy are undertaken carefully,” he added.

A “V” recovery is a type of economic recession and recovery that resembles a “V” shape on the charts.

Rajah believes investing in the stock market is not an option for the B40 group due to the high financial risk involved.

“Investment opportunities due to the additional savings throughout the MCO period should not involve the B40 group unless they are engaged in micro-finance ventures.

“As an economist, it is unlikely that I will purchase stocks during this time due to the likelihood of a more severe second attack,” he added.

Financial adviser Gunaseelan Kannan said the public should continue to save up, even after the sixmonth moratorium period is over and the movement control order (MCO) is fully lifted.

He said the situation could remain uncertain as new Covid-19 infections have been reported in China.

“Until a vaccine for the virus is available, people should continue to save money and have at least a year’s worth of their monthly consumption.”

Gunaseelan said workers in the gig economy and freelancers should have to save more as they are exposed to uncertainties that arise from their state of health and working environment.

He reaffirms that those involved in the gig economy should save up to 50% of their income or as much as they can, especially if they are still single and have fewer financial commitments.

“Those who are employed should also save at least 20% of their salary even though they have Employees Provident Fund savings, which should be reserved for retirement,” he said.

The Asia Pacific University of Technology and Innovation (APU) lecturer also advised those with limited savings to keep their savings as liquid assets.

Gunaseelan said liquid assets such as money on hand or other assets that can be readily converted to cash may not give relatively high returns.

“However, they are the best assets to have when a crisis strikes.

“If you have limited liquid assets, it’s time to increase them immediately,” he added.