Although Malaysia has been slowly recovering from the COVID-19 pandemic, which is good news, however, Malaysian economists are foreseeing a banking crisis in the next few months and have urged the government to take quick actions to set up an organization to ease the potential economical crisis before it’s too late.
Kameel Mydin Meera, economics and finance professor at International Islamic University Malaysia, mentioned that the organization he was proposing should monitor and control the rapid increase in bankruptcies and foreclosures which is expected to happen in the next few months.
He told FMT the banking crisis would be an indicator of the bankruptcies and foreclosures, thus bank merges are expected to take place.
The Malaysian government offered a six-month debt moratorium during the MCO (movement control order) on March 2020, mainly to provide financial support to Malaysians so they can delay their monthly repayments on housing and business loans.
Kammel said, “Once the six-month debt moratorium is over in September, the whole situation is going to be different.”
He also claimed that Malaysia needs to get ready for one of the worst economic recessions of all time and the recovery phase may take up to two years. Almost every single Malaysians will be affected badly by the recession.
He highlighted that the construction sector which had already gone downhill even before the COVID-19 pandemic might be heading for another round of downhill.
Many experts foresee that prices of houses and properties will have a drastic decrease, and Kameel backed up this statement by saying the demand for physical premises will decrease due to trend shift, where the crowd shifts from traditional ways of daily style towards e-commerce, online meetings and online education, which has gone trendy due to COVID-19 pandemic.
Kameel even suggested that the government should provide more funds through stimulus packages to ensure market liquidity and stimulate spending power.
“Liquidity is not about how much money is in the system, but how easily people can transact in the economy,” he said.
“Both the supply and demand shocks from the MCO, have affected market liquidity.”
“There were complaints that in the previous stimulus packages, many businesses did not get the promised help,” he said.
Kameel suggested that the government should create more jobs in the technology industry, a sector that many have claimed has the potential to grow rapidly after the pandemic.
He claimed that the digital economy will have high liquidity due to its inclusivity, and he suggested for cheaper access to transportation and communication networks. Malaysia will be able to recover from a recession as quickly as possible by increasing the accessibility to both sectors.
Economist, Hoo Ke Ping, said the Malaysian economy will show its true face in September 2020, when the country enters the third quarter of the economic year.
“If the economy continues to contract, then we will be in a full-scale recession,” he said. “But if the economy improves even slightly by September, then we have a chance to escape recession but we will still head towards a weakened economy.”