RAM sees unemployment hitting 4 – 4.5pct this year

KUALA LUMPUR: RAM Ratings expects Malaysia’s unemployment rate in 2020 to reach 4.0 – 4.5 per cent, higher than the usual baseline of 3.0 – 3.5 per cent.

The rating agency said the nationwide cessation of non-essential business activities during the strict lockdown periods of March and April triggered swift and sudden job losses.

“As the Movement Control Order was gradually relaxed from May, the employment trend stabilised as businesses reopened and some replacement hiring took place,” it said in a statement.

Sector-wise, it said the tourism-related and manufacturing sectors showed a disproportionate number of redundancies compared to the overall workforce.

The key economic centres of Kuala Lumpur, Selangor and Penang also recorded higher job losses relative to the national worker distribution.

These states could also face setbacks from the dearth of tourism activities and business travellers amid global lockdowns, said RAM.

It saw the manufacturing sector rebounding strongly in June, with essential and non-essential manufacturing capacity utilisation standing at 83 per cent and 70 per cent, respectively.

“The services sector was still underperforming, however, with the overall retail services capacity at 62 per cent in June.

“Meanwhile, the tourism and hospitality and construction sectors continue to struggle, registering 40 per cent and circa 65 per cent capacity utilisation rates by our estimates,” it said.

The rating firm said recovery of Malaysia’s non-essential and export-oriented sectors is instrumental to reducing slack in the labour market and hence yielding more employment opportunities.

“This will be crucial in the next few months as various incentives for businesses and households approach their expiry in fourth quarter of this year. Without strong job prospects, we expect consumer spending on necessities to stay relatively flat this year, with a marked decline in discretionary expenditure.

“Private consumption is therefore envisaged to post a contraction of 2.1 per cent in 2020 – substantially below the 7.0 per cent trend growth of previous years,” it added. — BERNAMA

Source: NST