Jobless rate may hit 4.5% this year due to MCO — RAM

KUALA LUMPUR (Aug 17): The unemployment rate in 2020 may range from 4% to 4.5%, up from the baseline of 3% to 3.5%, due to the imposition of the movement control order (MCO) in March and April, said RAM Rating Services Bhd.

In a statement by the rating agency, the temporary pause in non-essential business activities due to the movement restrictions aimed at curbing coronavirus infections had caused notable labour market weaknesses.

Tourism-related and manufacturing sectors have shown a disproportionate number of redundancies when compared to the overall workforce.

Meanwhile, higher job losses in Kuala Lumpur, Selangor and Penang were recorded vis-à-vis national worker distribution.

“These states could also face setbacks from the dearth of tourism activities and business travellers amid a global lockdown,” it noted.

RAM said the recovery of Malaysia’s non-essential and export-oriented sectors is instrumental in reducing the “slack” in the labour market and thus yielding more employment opportunities.

The agency added that this will be crucial in the next few months as various incentives for businesses and households are set to expire in the fourth quarter of 2020 (4Q20).

While the manufacturing sector rebounded strongly in June, with essential and non-essential manufacturing capacity utilisation standing at 83% and 70% respectively, the services sector was still underperforming with overall retail services capacity standing at 62% in June.

Meanwhile, the construction as well as tourism and hospitality sectors continued to struggle, registering capacity utilisation rates of 40% and 65% respectively, according to the rating agency.

Without strong job prospects, RAM expects consumer spending on necessities to stay relatively flat this year, with a marked decline in discretionary expenditure.

The agency expects private consumption to contract by 2.1% in 2020 instead of the 7% growth seen previously.

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