Gradual labour market recovery expected from 2H21


BANK Negara Malaysia (BNM) projects a gradual labour market recovery from the second half of 2021 (2H21) onwards in line with improved economic activities.

While both unemployment and underemployment are expected to increase marginally in the first quarter of 2021 (1Q21), it will gradually decline towards the end of the year, said BNM governor Datuk Nor Shamsiah Mohd Yunus (picture).

The central bank expects a temporary weakening of labour market conditions in 1Q21 due to the Movement Control Order 2.0.

“Employment in the manufacturing sector, particularly in export-led electrical and electronics, is projected to recover at a faster pace because they will benefit from improvement in external demand.

“However, conditions continue to be challenging for workers in the consumer-facing and high-touch segment, this will include tourism and travel services-related sectors, ie food and beverage, accommodation and transport,” she said in a virtual press conference on the BNM Annual Report 2020 yesterday.

On Malaysia’s labour market, Nor Shamsiah said prevailing structural issues are weighing in on future job and income prospects.

Following are the structural issues highlighted: The low-cost production model suppresses wages and productivity enhancement. High-skilled job creation has been insufficient to keep up with the entry of fresh graduates. There has been skill mismatches between workers and industry needs.

“As a result of the pandemic, the vulnerable segment of the labour market has been more affected, in particular women, non-standard workers and youth, experiencing higher unemployment losses,” she added.

She proposed that focus should be on attracting quality investment, building innovation capacity, enhancing economic complexity and social protection reform.

Nor Shamsiah said comprehensive policies are needed in the labour market to support recovery from the crisis and prepare the workforce for future work.

On digital economy, Nor Shamsiah said the share of digital economy is expected to reach almost 23% by 2025, supported by measures under the Malaysia Digital Economy Blueprint, Jalinan Digital Negara and the 5G rollout.

She expects the digital economy share will rise further post Covid-19, with the widespread remote working arrangement and the acceleration in e-payment and e-commerce.

Read our previous report here

Labour market remains challenging in 2021