Unemployment in tourism-related sectors may rise on outbreak, says MIER

Unemployment in industries such as recreational services and air travel could spike between 0.5% and 0.8%, and 1.8% and 3.5% respectively


THE Malaysian Institute of Economic Research (MIER) expects unemployment to rise in tourism related sectors in the first quarter this year as the Covid-19 outbreak continues to disrupt travel plans and supply chains globally.

Based on projections by the local think tank, unemployment in industries such as recreational services and air travel could spike between 0.5% and 0.8%, and 1.8% and 3.5% respectively, with the latter representing the worst-case scenario.

MIER deputy director Prof Dr Jamal Othman said companies affected may consider job cuts to cope with the financial impact of Covid-19.

“From the results that we have, the tourism sector is the most affected. If companies respond rationally from a business perspective, they may need to shed some of their employees.

“But if they think it is not something desirable from the social point of view, these companies may absorb the losses and they may be able to maintain their current workforce by utilising some other funds that they have,” Jamal said at a press conference in Kuala Lumpur last Friday.

“It depends on the policy of the organisation. If they want to keep their workforce thinking that the outbreak may somehow subside within a reasonable period, the unemployment effect may not happen,” he added.

The virus outbreak has put millions of jobs in limbo, especially those involving restaurants, hotels and retail industry. In China, several companies and business operations have announced plans to reduce its workforce despite Beijing saying it would prevent large-scale lay-offs caused by Covid-19.

In Thailand, local news outlets reported a 34% increase in unemployment in Phuket — a province popular with tourists — with 80 people registering as unemployed per day.

About 1,000 people have lost their jobs from Jan 26 to Feb 20, the Phuket Provincial Employment Office confirmed.

Malaysia’s unemployment rate remained stable at 3.3% as of last month. The Human Resources Ministry last week refuted claims that 100,000 employees could be laid off if the outbreak prolongs until year-end, describing the allegation as mere speculation.

Checks by The Malaysian Reserve indicated that there have been no retrenchments in hard hit sectors yet.

National carrier Malaysia Airlines Bhd said there are no plans to cut its workforce so far, while Air- Asia Group Bhd did not immediately respond for comments, but its recruitment post on Facebook suggested otherwise.

Meanwhile, Malaysian Association of Hotels CEO Yap Lip Seng said its members have taken measures to reduce cost including cuts on electricity consumption, and cessation of overtime and allowances for extended annual and unpaid leaves. However, it has not involved retrenchments, Yap said.

“As with direct headcounts, employers are to first consider reduction of any foreign employment before the locals, and that is within applicable laws. Having said that, we’ve not seen direct retrenchments, voluntary or mandatory separation schemes just yet,” he said.

Separately, MIER chairman Tan Sri Dr Kamal Salih did not rule out the possibility of further reductions to the Overnight Policy Rate (OPR) by Bank Negara Malaysia to cushion the impact of Covid-19.

“Another cut should have a positive impact. It means that more liquidity will go into the market. Why would they want to tighten at this point when the economy is not doing so well? It will only worsen the situation, so a further cut is definitely possible,” he said.

The central bank last month moved to cut the OPR by 25 basis points to 2.75%, bringing it to its lowest level since March 2011.