Harder than a rock and a hard place

The prognosis is gloom and doom as the world is not expected to return to normalcy in the next 6 months

Pic by TMR

NUMBERS do not lie, unlike people. No matter how much you try to sugarcoat the outlook, it will not be the first day of summer. Malaysia is heading towards an inevitable recession.

The central bank’s forecast puts it at -2% GDP contraction at the lower end and 0.5% growth if the economic scenario does not fall off the cliff.

The World Bank’s forecast puts the figure at negative 4.6% under the lower-case scenario.

Globally, the world is plunging into an abyss. A great escape for Malaysia is unlikely as the coronavirus infection topped one million people and more than 50,000 (at press time) had died from the pathogen.

Antigen for the SARS-like virus is nowhere close despite talks of clinical and human trials soon. Creating the antigen is a challenge.

But how do you immunise the world’s 7.58 billion population, prevent another outbreak and another round of global lockdown?

It is no longer between a rock and a hard place. It will be hard all the way.

A CEO of a group of companies moans the mountain he has to climb. “All the cash reserves built over the years will be gone. It will be like starting all over again from scratch,” he said as incomes from his key businesses dried up faster than the dew during a desert summer. He is in survival mode.

Many companies are in the same dark alley. The country is in a darker backlane.

Malaysia’s biggest trading partner China may have survived the pandemic, but its economy is expected to grow just over 2% this year, a growth rate unheard of for the US$14.3 trillion (RM62.32 trillion) economy.

China’s 6% final quarter 2019 GDP is already the lowest in 29 years. Malaysia’s trade with China alone is worth US$33.7 billion last year.

Singapore, Malaysia’s second-largest trading partner, may have pulled a Houdini last year, but is on a direct collision course with the recession god with 2020 GDP projected at -4% to -1%. Our neighbour’s only safeguard is the total reserves that is a state secret, which many analysts estimate above S$500 billion (RM1.51 trillion).

The US, Malaysia’s third-largest trading partner with products and services exchanges totalling US$23.1 billion, is being engulfed by the pathogen. More than 45 states in the US have imposed stay-home orders.

It has the largest number of infections in the world and will hit one million people in a matter of days. The number of unemployment claims in the US had risen to more than six million people.

The world’s largest economy is in excruciating pain, falling from the epiphany of greatness. When the US sneezes, the whole world catches the flu.

The World Bank is already predicting a global recession. The United Nation is already expect- ing 25 million job losses caused by the pandemic. The number of people to fall below the breadline will multiply.

The challenge for Malaysia is that almost 85% of its exports reached its 15 top trading partners. Malaysia, unlike China, does not have US$2 trillion reserves or more than 400 million middle-income earners who can kickstart the economy.

The prognosis is gloom and doom as the world is not expected to return to normalcy in the next six months.

Malaysia had survived previous economic contractions, crises and recessions, but the current crisis presents an unprecedented challenge. Malaysians must be prepared for the worst as the worst is yet to come.

  • Mohamad Azlan Jaafar is the editor- in-chief of The Malaysian Reserve.