The extended lockdown resulted in an additional 9,500 people losing jobs in July, bringing the total number of unemployed persons to 778,200
By LYDIA NATHAN / Pic By MUHD AMIN NAHARUL
THE unemployment rate in Malaysia remained high at 4.8% in July 2021, after an economic lockdown was extended throughout the country, including business hubs like the Klang Valley and Johor.
UOB Malaysia’s Global Economics and Markets Research stated that the share of the labour force that remained under Phase 1 of the National Recovery Plan (NRP) made up approximately 52% of Malaysia’s total labour force.
Its senior economist Julia Goh said this resulted in an additional 9,500 people losing jobs in July compared to June, bringing the total number of unemployed persons to 778,200.
The labour force participation rate also maintained at the lowest level since July 2020 at 68.3%.
“Total employment posted the second month of reduction by 2,700, weighed down by all but the services sector.
“The hiring rebound in the services sector was largely credited to the increased employment in food and beverage, transport and storage, and information and communication services sub-segments, while the manufacturing sector lost hiring momentum for the second month and the construction sector trimmed headcounts for the third consecutive month,” she said in a note.
UOB Malaysia’ economist Loke Siew Ting said the labour market will continue to recover albeit at a moderate pace as almost all states and federal territories, except for Johor and Kedah, have transitioned into the second, third or fourth phase of the NRP.
He said the latest areas allowed to move into Phase 2 of NRP included the main economic hubs in Malaysia, Selangor, Kuala Lumpur, and Putrajaya.
“In addition, with 80% of the adult population expected to be fully inoculated over next two months, Malaysia may be able to move into an endemic Covid-19 phase by the end of October.
“To ensure a safe reopening of the economy in an endemic stage, the government will introduce a national testing strategy in which the public would undergo tests on a regular basis regardless of their vaccination status. This alongside the continuation of government policy support will reinforce growth and labour market recovery prospects,” Loke said.
He added that, however, uncertainties surrounding new virus variants and business prospects could deter substantial improvement in the nation’s hiring, keeping the national jobless rate above the pre-pandemic levels of around 3.3% in the near term.
“Hence, we maintain our 2021 year-end unemployment rate estimate at 4.5%,” he said.
Last week, Bank Negara Malaysia (BNM) maintained its Overnight Policy Rate at a historic low of 1.75%, mainly due to the surge in Covid-19 cases.
Moody’s Analytics economist Denise Cheok said the nationwide lockdown in June and July 2021 hit the key manufacturing sector, as a 60% cap on the workforce was implemented to slow the spread of the virus.
“However, things are looking up on the vaccination front as easing restrictions will allow the workforce capacity to increase from 60% to 80%, as well as more social activities for fully vaccinated citizens,” Cheok said.
Core inflation is expected to remain subdued due to weak consumer spending, leaving the central bank capacity to keep its rates low into 2022.
“This is crucial because the country is running out of fiscal space. Malaysia is fast reaching its statutory debt ceiling of 60% of gross domestic product (GDP).
“The new government has proposed raising this limit to 65% to allow for further spending. Although this will provide some short-term relief, additional fiscal packages will likely be less generous than those announced last year,” Cheok said.
In line with that, Moody’s Analytics has downwardly revised its forecast for Malaysia’s 2021 GDP growth in the September baseline to 3.5%, from 4.7% previously, to account for the persistent effects of the lockdown.
“Third-quarter growth will be hampered y the most recent wave of the pandemic, as nationwide restrictions forced non-essential businesses to shut.
“The weak labour market out- look will keep consumer spending tepid, although we might see some return to growth towards the beginning of next year. In the meantime, monetary policy is expected to remain accommodative while the economy gradually gears up to speed,” Cheok noted.