A rose that is not always a rose

Once all these temporary respites evaporate, the catastrophic impact of the pandemic will be more visible


THE central bank released the second-quarter economic performance about two weeks ago. As expected, slumps in all key sectors — tourism, retail, services, manufacturing, and oil and gas — sent the country into a tailspin.

The 17.1% plunge of the country’s economy during the April to June period came like a bolt from the blue. Earlier predictions were more generous.

The Covid-19 pandemic is the orifice that sucked the economy into uncharted waters.

Across the world, billions of people are impacted. It is hard to find a soul on earth who has been left unscathed by the flu-like bug.

For the first six months of this year, the economy had contracted by 16.5%. Based on the current figures, Malaysia is the worst-performing economy during the Covid-19 quarter in South-East Asia.

Neighbouring Thailand saw its economy shrinking 12.2% during the period as the Covid-19 lockdowns took a toll on the tourism-dependent country. It was Thailand’s biggest contraction since the Asian financial crisis.

Malaysia’s quarterly contraction was also the biggest since the crisis 22 years ago.

But kudos to the government.

It has been successful on many fronts. The Covid-19 spread is contained in the single-digit range. The lockdown was effective and the economic measures prevented a total meltdown of the country’s social fabrics.

It is inconceivable how low the country could have deteriorated without the various assistance and measures.

The loan moratorium in particular helped ensure food on the table for millions as jobless figures sprinted to new highs. It kept the roof over the heads in otherwise soon-to-be eviction notices for failed mortgages.

The head at the central bank Datuk Nor Shamsiah Mohd Yunus said the worst is over for the country.

But is the worst behind us as trumpeted? Or the start of a devastating fallout?

The loan moratorium is scheduled to end in September and all the other furlough schemes would also see the end. Household debts are a huge chunk of the banking system’s borrowings.

One has to remember during the financial crisis of 1998, the country’s economy was only US$109 billion (RM455 billion) in 1997 before heading south to US$78 billion in 1998.

Last year, Malaysia was the world’s 33rd-largest economy at an estimated value of US$365 billion. An 11.5% slump in the final quarter of 1998 had been less devastating compared to a bigger economic pie today.

In 1998, the country’s population was only 22.11 million. Today, the country has 33.1 million people. A 5.3% unemployment against a population of 31 million (not including the estimated four million migrants) is larger than what was already a catastrophe back during the Asian financial crisis.

Those are today’s realities. Once all these temporary respites evaporate, the catastrophic impact of the pandemic will be more visible.

Joblessness, non-performing loans, eviction notices and auctions will rear their ugly heads.

In William Shakespeare’s “Romeo and Juliet”: “A rose by any other name would smell as sweet.”

But a rose is not always a rose. And in the months to come, it would reveal if all roses smell as sweet.

Mohamad Azlan Jaafar is the group editor and MD of The Malaysian Reserve.