MALAYSIA’S unemployment rate will hit 4.5% to 5% within a few months because of the economic impact caused by Covid-19 pandemic, said economists.

The unemployment rate already hit a high mark of 3.9% in March, beating the previous high of 3.69% in 2000.

They said with the pandemic continuing to assail the economy in April and May, a spike in unemployment will hardly be a surprise.

Unemployment can easily reach 4.5% to 5%, Malaysian-Chinese Chamber of Commerce’s socioeconomic research centre executive director Lee Heng Guie told The Malaysian Insight.

Lee said the unemployment rate may peak in late second quarter or in the third quarter.

Among the most affected by the Covid-19 pandemic and the ensuing movement-control order (MCO) are the self-employed, who in March numbered about 2.8 million.

The Labour Department said the market is expected to be heavily impacted as the MCO was in place the whole of April and only relaxed in May.

The number of unemployed increased to 61,000 in this period, compared with 52,000 in the same period last year, it said.

Universiti Tunku Abdul Rahman associate professor of economics Wong Chin Yoong said the unemployment situation this time is different compared with the 2008 and 1997 financial crises, as the unemployment rate did not grow by much while the economy was hit hard.

This time, Wong said, economic growth was better than expected in the first quarter of this year but unemployment exceeded expectations.

Those affected the most are small and medium enterprises (SMEs), which account for two-thirds of businesses and employers, and other than the airline industry, not many of the largest contributors to Malaysia’s GDP risk closing, he said.

Lee said this resulted in a situation where the economy keeps growing but the unemployment rate also continues to rise.

“GDP may continue to grow and it will not look too bad overall. It may even experience moderate growth in the third quarter, but unemployment is expected to get worse.”

The situation is similar to the 1986 and 1988 financial crises, which led to many Malaysians emigrating to other countries, Lee said.

More will suffer in the coming months, even if economic growth exceeds expectations, he said.

He added that 98% of businesses in Malaysia are SMEs or micro businesses, but they only account for one-third of GDP with the remaining 2% of businesses making up some 60% of the economy.

“But in terms of manpower, SMEs account for two-thirds of the entire workforce, so it is a matter of how high it will go.” – May 23, 2020.