PETALING JAYA: An early recovery for Malaysia’s economy in the second half of 2020 seems unlikely if Singapore suffers a severe downturn.
This grim outlook was painted by economists after Singapore forecast that its gross domestic product (GDP) could shrink between 4% and 7% in 2020, more than the 1% to 4% predicted earlier in March, plunging the island republic into its worst ever recession.
Former World Bank economist Lim Teck Ghee said Singapore’s forecast spells trouble for Malaysia as a shock to multiple industries is expected.
“This latest downgrade is due to deterioration in the external demand outlook and the extension of circuit breakers in the republic to June 1,” Lim told theSun.
“It will definitely lead to more severe ripple effects on the Malaysian side. We can expect a worsening of impact not only on employment but also across the entire range of linkages that are found in the two economies.
“These include investment and trade, manufacturing, travel and tourism, retail and services... besides the hit to the existing supply chain.”
Lim said policies must keep up with the current changes, noting that government plans to deal with international trade shortfall are unclear so far.
“We have not seen any clear indication from our policymakers on the extent of damage and how they plan to mitigate the pandemic-related economic disruption arising from our economic ties to Singapore and other Asean countries.
“The sooner these impacts are computed and relief measures put in place, the more confidence the public can have that our policymakers are well prepared for the shocks to the economy and the livelihood and well-being of Malaysians,” he added.
McMillan Woods entrepreneur tax accountant Datuk Seri Raymond Liew pointed out that the Singapore economy is one of the most stable in the world, with practically no foreign debts and with high government revenue and a consistent surplus.
“If the economy in Singapore were to shrink, we too will shrink perhaps more, as our two biggest trading partners are Singapore and China.”
Liew said Malaysia will suffer more than Singapore economically as we are very much dependent on trade with our neighbour.
“The spiral effect will cascade all the way down to our supply chain and this will probably mean that any hopes of recovery in the second half of 2020 will be thrown out of the window,” he added.
Liew urged the government to introduce more consequential economic stimulus packages to help small and medium enterprises (SME).
“So far, the few economic stimulus packages offered (are of) little financial help, as all the funds are dried up before these SMEs can lay their hands on them.”
“Proactive steps are needed urgently to address pertinent issues being faced by SMEs as the business owners are facing a severe cash flow crisis.”
He called for wage subsidies to avoid a spike in unemployment, rental waivers for shopping mall units, and a new law to address terms of contracts to avoid legal suits that would overwhelm the courts.
According to the Malaysia External Trade Development Corporation (Matrade), Singapore was Malaysia’s largest export partner in the first quarter of this year, with RM34.84 billion worth of goods exported there.
That accounted for 14.6% of Malaysia’s total exports during that period. Imports from Singapore during the same quarter totalled RM19.64 billion (9.7%), second only to China’s RM39.68 billion.
Sunway University Business School professor of Economics, Dr Yeah Kim Leng, said exports to Singapore are expected to decline, alongside an already declining demand for Malaysian labour.
“Malaysian firms exporting to and through Singapore will face reduced orders in most sectors, with some exceptions such as fresh and processed food and health and medical supplies,” he said.
“The government will need to provide further support for a large number of Malaysian workers in Singapore who are expected to be repatriated.”
However, Yeah said Malaysia would fare better than Singapore.
“Singapore’s exposure to the global economy is 2.5 times that of Malaysia. A global recession will therefore have a greater impact on Singapore than on the Malaysian economy.
“However, given the simultaneous external and domestic demand and supply shocks, it will also be hard for Malaysia to avert a contraction, given its strong fiscal and monetary support to sustain household spending,” he said.