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Famous economists in Malaysia have foreseen a banking crisis in the near future and have urged the government to take quick actions to set up an agency to lighten the potential economical crisis before it’s too late. 

Kameel Mydin Meera, an experienced economics and finance professor at International Islamic University Malaysia, mentioned that the agency he was proposing should monitor and take into account rapid increase in bankruptcies and foreclosures which he expected to happen in the near future.

He told FMT the banking crisis would be an indicator of the bankruptcies and foreclosures, thus bank merges are expected to take place. 

During the MCO (movement control order), the Malaysian government offered a six-month debt moratorium to Malaysians so they can delay their monthly repayments on housing and business loans and ease their financial problems during this pandemic. It started in March 2020. 

“Once the moratorium is over in September, the whole situation is going to be different,” he said.

malaysia economy recession

He also claimed that Malaysia will be heading for one of the worst economic recessions of all time and the recovery phase may take up to two years with every single Malaysians feeling the effect of the recession. However, civil servants and other workers on fixed salaries might not be affected as bad.

He highlighted that the production sectors are suffering from the pandemic since March and the construction sector which had already gone downhill even before the COVID-19 pandemic might be heading for another round of downhill. 

While many experts foresee that prices of houses and properties will have a drastic decrease, Kameel backed up this statement and said the demand for business premises will decrease due to people shifting towards e-commerce, virtual meetings and online education. 

Kameel even suggested that the government should inject more funds through stimulus packages to prevent any shrinking of liquidity.

“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 (movement control order), in a way, have destroyed liquidity.”

“There were complaints that in the previous stimulus packages, many businesses did not get the promised help,” he said, adding that funds that are distributed should be transparent in every aspect. 

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 called for cheaper access to communication networks and transportation. By increasing accessibility to both sectors, Malaysia can recover from a recession quicker. 

malaysia economy crisis

Another economist, Hoo Ke Ping, said the Malaysian economy will show its real colours 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 picks up even slightly by September, then we may escape recession but still head towards a very weak economy.”

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