PETALING JAYA: The impact of Covid-19 pandemic will be massive from an employment and business sustainability standpoint, Bangi MP Dr Ong Kian Ming (pix) said today.
The last two major economic downturns, in 1998 and in 2008, were caused by financial crises which led to significant demand shocks to the global economy in varying degrees, he said today.
The Asian financial crisis in 1998 and the global financial crisis in 2008 caused a sharp decrease in financial lending as well as a sharp decrease in consumer demand which then caused GDP to drop, he pointed in statement on the impact of the Covid-19 pandemic on the economy.
“Firstly, the nature of this supply shock is global in nature. Many countries had to shut down meaningful economic activity over the past few months,” he said.
“Most factories were closed as were almost all shopping malls, restaurants and other retail and service activity. International travel grounded to a standstill and so did tourism related activities.
“The negative economic impact of this global ‘lockdown’ still remains unclear. We only know that the impact will be massive from an employment and business sustainability standpoint.”
Secondly, we are not likely to experience a V-shaped economic bounce as the impact of the Covid virus will remain, at least until a vaccine is found, produced and widely distributed, former deputy minister of International Trade and Industry pointed out.
“In the meantime, everyone has to adjust to a ‘new normal’ where supply restrictions will continue,” he said.
“For example, many service sector businesses will not be able to operate at pre-Covid capacity. Restaurants have to decrease their seating capacity, cinemas have to leave seats empty between cinema-goers, hair salons and gyms – when they are allowed to operate – will have to limit the number of clients in their premises.”
Thirdly, some capacity has already been “destroyed” by the lockdown including in Malaysia, Ong said.
“Many hotels have already announced that they will be closed permanently. Some foreign textile manufacturers have also announced the impending closure of their production facilities in Malaysia.
“More businesses will likely announce their closure after the Hari Raya holidays. The lifting of the MCO will not save many of these businesses from shutting down.
Fourthly, the severe impact of this negative supply shock has also caused an equally severe and negative demand shock to the global economy,” he said.
