THE latest figures released by the Department of Statistics Malaysia (DOSM) in which the unemployment rate for May is increasing at a slower rate is a good sign that the stimulus package announced by the government during the early days of the Covid-19 pandemic had worked.
The unemployment rate in May rose by 0.3 to 5.3 per cent from April 5. In terms of the number of persons out of jobs, there were 826,100 unemployed persons in May compared to 778,800 in April – an increase of 47,300 persons.
This compares favourably with the March to April figures when the 610,000 unemployed persons in March (for a 3.9 per cent jobless rate) ballooned to 778,800 in April for a jobless rate of 5 per cent – a staggering increase of 168,800 jobless people (1.1 per cent) compared to the increase of 47,300 jobless people (0.3 per cent) between April and May.
Of course, going by the absolute number of 826,100, the number of unemployed is quite a high number. The highest was first recorded in 1982 at 7.4 per cent.
The good numbers in May could also be due to the result of the gradual re-opening of the economy, which began on May 4 with the introduction of the Conditional Movement Control Order (CMCO). Going by other indicators, there is a case for an optimistic outlook on the unemployment situation and the economy as a whole. This is borne out by the facts that:
The Manufacturing Purchasing Managers' Index (PMI), an indicator of manufacturing performance, rose sharply to 51.0 in June – its highest since Sept 2018, up from 45.6 in May. The Industrial Production Index (IPI) rebounded by 18.2 per cent in May from April; and saw a 19.1 per cent gain in manufacturing sales to RM90.2 billion in May compared to the previous month.
These rapid turnarounds in production since the severe collapse in April suggest a very strong possibility for a V-shaped recovery. Moreover, the Penjana stimulus which was announced in early June would have worked itself into the economy by the time the June unemployment figure is announced in mid-August.
What's more, on July 7, Bank Negara (BNM) cut benchmark interest rate by another 25 basis-point to a record low of 1.75 per cent – the fourth since January. Malaysian benchmark rates have never been cut below 2 per cent, even at the height of global financial crises of the past.
Hopefully, this combination of fiscal stimulus and monetary policy will stimulate the economy so that even in the worse-case scenario of a W-shaped recovery, the detrimental effect of the pandemic on the economy is greatly cushioned via the judicious use of fiscal and monetary policies.
Some analysts have unfairly criticised Prime Minister Tan Sri Muhyiddin Yassin for his reluctance to dip into the government's coffers and introduce more stimulus measures to help in the recovery of the ailing economy.
However, he is astute enough to know that full recovery is dependent on Malaysia attaining the status of a country that is free from Covid-19 infection, and even if the infection is under control, he is aware that a second wave of infection cannot be ruled out.
That is why he does not metaphorically put all the eggs in one basket through announcing stimulus after stimulus ad infinitum. He leaves some for contingency in case a second wave of attack materialises.
In between stimulus, he allows monetary policy to be tweaked so that if the economy recovers in the short to medium term, there will be more monies for the government which can be used for future stimulus should the situation deteriorate.
More optimistic outlooks are on the cards, with the recent announcement of the government's health accreditation scheme for hotels and the agreement forged between Malaysia and Singapore to gradually relax people-to-people movement by August. These efforts will definitely boost the tourism sector.
Muhyiddin has already mapped out an exit strategy for the economy through his 6Rs strategies: Resolve, Resilience, Restart, Recovery, Revitalise and Reform. Perhaps the fifth phase of Revitalise will take place once Malaysia is declared Covid-19 free.
The writer is Director, Media & Communications at EMIR Research, a think tank focused on strategic policy recommendations based on rigorous research.