Oil Price Drop, Political Turmoil, and COVID-19... Malaysia's Economy Staggering Under Triple Crises

Over 1,300 COVID-19 Cases Confirmed... Military Deployed, Entry Bans and Movement Restrictions
Trade Volume to GDP Ratio at 131%... High External Dependence and Small Domestic Market
Growth Rate Revised Down from 4.2% to 2.5% This Year
Academia and Others Demand Increased Economic Stimulus... From 5 Trillion to 11 Trillion Won

The food court in Kuala Lumpur, Malaysia is empty. Due to the government's movement control measures, restaurants are only allowed to offer takeout and delivery.

[Asia Economy Kuala Lumpur Correspondent Hong Seong-a] As the number of confirmed cases of the novel coronavirus infection (COVID-19) in Malaysia exceeded 1,000, red flags have been raised for the economy. There are predictions that the economic recession will accelerate as traffic with neighboring Singapore is blocked for quarantine purposes.

According to local media such as The Star on the 24th, the number of confirmed COVID-19 cases in Malaysia reached 1,306 as of the previous day, increasing by about 200 in two days. The Malaysian government has already issued a movement restriction order from the 18th to the 31st, blocking entry and exit of both nationals and foreigners and requiring police permission for domestic movement. Additionally, from the 22nd, military forces were deployed to enforce staying at home except for essential work. Violations will result in criminal penalties or fines.

Experts warn that Malaysia's economy, which is highly dependent on external trade, could suffer a fatal blow due to movement restrictions. According to the World Bank, as of 2018, Malaysia's total trade volume accounted for 131% of its Gross Domestic Product (GDP). Jayant Menon, former Chief Economist at the Asian Development Bank (ADB), emphasized, "Malaysia is highly dependent on external trade and has a small domestic market, making it vulnerable to the impact of COVID-19," and urged the government to expand the scale of economic stimulus measures. Standard Chartered Global Research has revised Malaysia's GDP growth forecast for this year down from 4.2% to 2.5%. Affin Hwang Capital Research also adjusted the GDP growth forecast from 4.0% to 3.3%.

Many believe that the economic recession in Malaysia was predictable. It is seen as the result of a combination of falling international oil prices and political turmoil even before COVID-19. Bloomberg reported that with the decline in international oil prices, coal and petroleum products, which account for 7.1% of GDP, are taking a direct hit, and estimated that every $1 drop per barrel in international oil prices causes a loss of about 300 million ringgit (approximately 84.9 billion KRW) to the Malaysian federal government. The political situation is also unstable after Prime Minister Mahathir Mohamad suddenly announced his resignation last month and Muhyiddin Yassin was appointed as the new prime minister.

The tourism industry is particularly hard hit. Malaysia designated this year as the "Year of Malaysian Tourism" and set a target to attract 30 million foreign tourists. However, due to the spread of COVID-19, the tourism year campaign was canceled, an unprecedented event. It is widely expected that the tourism industry will be severely contracted as foreign tourist arrivals decrease due to the COVID-19 impact. The number of tourists visiting Malaysia this year is expected to decrease by 30% compared to the previous year, with estimated losses reaching 30 billion ringgit (approximately 8.49 trillion KRW).

The economic downturn is also negatively affecting consumption. The Malaysian Retailers Association forecasted that the domestic retail industry would shrink by 3.9% in the first quarter of this year compared to the same period last year. In particular, the livelihoods of small business owners, including sole proprietors, have become bleak. The Malaysian Ministry of Domestic Trade and Consumer Affairs announced that only takeout and delivery operations are allowed for restaurants, bakeries, food courts, and street vendors. However, due to movement restrictions, food ingredient prices have surged and supply shortages have occurred in some areas, making even this difficult.

With the complete suspension of performances due to movement control measures, workers in the culture and arts sector are also facing a crisis. According to The Star, as of the 22nd, a total of 132 cultural and artistic performances have been postponed or canceled. The estimated damage amounts to about 4 million ringgit (approximately 1.1 billion KRW).

Although the government announced a 20 billion ringgit economic stimulus package at the end of last month to overcome COVID-19 damages, voices calling for further expansion of the stimulus package have grown as the situation worsened this month. The Malaysian Manufacturers Association urged expanding the existing 20 billion ringgit (approximately 5.66 trillion KRW) to 40 billion ringgit (approximately 11.33 trillion KRW). In response, the government launched an Economic Action Council on the 14th and announced that related measures would be issued weekly. The Economic Action Council first announced on the 16th that all citizens would receive a 2% reduction in electricity bills for six months starting in April, and employees who apply for unpaid leave for six months would receive 600 ringgit (approximately 170,000 KRW) per month.

Mohd Nordin, former chairman of the Islamic Medical Association, pointed out, "Malaysia should conduct intensive testing for COVID-19 like South Korea, rather than closing borders like China and Italy," warning that "the economy will be paralyzed due to vague anxiety about the spread of COVID-19."

This content was produced with the assistance of AI translation services.