Employers Believe Unemployment Rate Could Reach 8% By December

It was reported that the unemployment rate in Malaysia escalated to 5.3% in May 2020 from 5% in April 2020. The number of unemployed persons increased by 47,300 to 826,100 individuals, according to the Statistics Department.

But the department's chief statistician Datuk Seri Dr Mohd Uzir Mahidin stated that the monthly change of unemployment rate in May 2020 was very much lower than the change recorded from March to April at 168,300 people.

But according to a recent report by The Sun Daily, that may not be a sign of improvement but instead a fallacy. 

Most of the government assistance will end in October, as well as the moratorium on loan repayments. This is when the moment of truth will come.

For employers, this means extra operating costs, as they will need to start paying their debts despite businesses not picking up to pre-pandemic levels due to lower consumer confidence and tighter spending behaviour.

The industry players believe that if there will be no further assistance, the unemployment rate could break the 7% mark by December with some two million Malaysians expected to be unemployed.

In urgent need of aid

SME Association of Malaysia president Datuk Michael Kang stated that even though unemployment could improve from now until September, it was important for Putrajaya to intervene so another round of mass retrenchments can be prevented.

“At the moment, businesses are only recording about 50% sales compared to before Covid-19. If they are not able to hit 70% by September, they won’t be able to prepare enough funds to service debts,” he said.

“If the government actively comes up with assistance to drive the economy forward, then I think unemployment won’t reach two million. But if they do nothing, it certainly will.”

Infographics source: The Edge Markets
 

Kang suggested that the government should extend the loan moratorium at least until December so that the high retrenchment figure in April will not be repeated later in the year. He also said that Bank Negara Malaysia should order financial institutions to loosen requirements for business loans and expedite applications.

“Commercial banks are too slow in processing applications. It has been three, four months but most of the loans have not been released.”

“The small and medium enterprises (SME) in particular need immediate cash injection because without funds, they can’t run their businesses. I really hope the government can pressure the banks to speed up the process and provide the loans,” he added.

'A false sense of security'

Malaysian Employers Federation executive director Datuk Shamsuddin Bardan said that the low unemployment rate in May could give "a false sense of security" and that the real test will come in October once the incentives stop and employers will need to be on their own feet.

 “The question is whether they are able to do so. Looking at the current circumstances, it will be very difficult, as far as the domestic and export markets are concerned.”

Shamsuddin said prospective job seekers could also expect to see companies hiring on a shorter contract basis as they look to minimise risks and losses.

“What the government needs to do now is ensure they go deeper and bigger with their aid. Increase the funding to help businesses, and extend whatever assistance, including the loan moratorium, until at least December,” he said.

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