The Department of Statistics Malaysia (DOSM) has predicted that the country is heading into an economic recession in the next four to six months.
That means we will be going in for a recession somewhere in September to November 2020.
In early April, BNM imposed a six-month moratorium on payment for the individual and businesses to give some breather to Malaysians. We will see the impact after that six months, which will be ended by the end of September also.
According to Datuk Seri Mohd Uzir Mahidin, their prediction based on the latest leading indicators and that dynamic measures required to transform the current economic structure.
A few signs of the coming recession include;
a. Malaysia’s gross domestic product grew lower.
Malaysia’s gross domestic product grew marginally at 0.7% in the first three months of the year, the lowest since the third quarter of 2009.
That’s significantly less than the expansion of 3.9% to 4.2% expected as the country lost 22.8 billion Ringgit ($5.3 billion) in economic output because of a countrywide lockdown.
b. The Malaysian economy is not looking good.
The early indications in April and May 2020, the economic environment is foreseen to be unfavorable for Malaysian businesses. With the global lockdown, this unprecedented situation has caused a sharp contraction to the economy like never before.
c. Trade with China has dropped.
On a year-on-year basis, trade with China, representing 16 percent of Malaysia’s total trade in the first quarter of 2020 (1Q20) was down by 2.1 percent compared to the same period of 2019.
d. The COVID-19 pandemic spread globally and internally.
The Covid-19 outbreak has caused the temporary closure of businesses globally and in Malaysia, where many companies faced the risk of immediate cash flow constraints as their earnings decreased.
e. The pandemic strongly impacted the Tourism industry.
The tourism industry was the first to be impacted with tourist numbers dwindling since January and tour packages being canceled.
This effect had a negative domino effect on the accommodations industry as well as the aviation industry as there was a decline in demand from travelers.
f. The real estate industry takes the hit too.
The significant impact on the retail segment is that people will hold back from buying luxury properties during these tough times. The reduced average sales of the property in the first half of 2020 have led to a reduction in property prices.
g. The unemployment rate keeps going up.
According to the Department of Statistics Malaysia, the unemployment rate in March 2020 is 3.90%, a higher number compared to March 2019, which is 3.40%.
The unemployment rate in March 2020 also higher compared to 3.30% in February 2020.
The Department of Statistics, in a report early May, said the unemployment rate is at the highest in a decade — up to end-February, some 525,200 are unemployed.
h. The stock market doesn’t look promising.
As we were writing this, the Kuala Lumpur Stock Market has risen from 1473.55 to 1492.55 points.
Even though Kuala Lumpur Stock Market is rebounding now, but in the last few months, the stock market has significantly impacted. Where most stocks already fell more than 50% in this short period.
Next couple of months, many sentiments will contribute to the uncertainty of the Kuala Lumpur Stock Market.
i. Our Malaysian currency Ringgit weakened over the past few months.
As we’re writing this, the Ringgit was quoted at 4.2900/2960 against the greenback, from 4.3150/3200. Gains in global oil prices provided a boost to market sentiment on the Ringgit.
However, in June and December, last year, Ringgit were quoted 4.1906 and 4.1425 against the USD, respectively.
So, the golden question.
Are we all will be prepared for this once-in-a-lifetime recession like no other financial recession?
I can say, No one is ready for this because no one has seen anything like this, not even the famous Warren Buffet.
But, it doesn’t mean we can’t be doing something. Instead of focusing on what we can’t, why not shift our mind to what we CAN DO during this unprecedented period.
Here we will be sharing FIVE TIPS TO PREPARE FOR A RECESSION.
a. We can change.
One positive thing that comes out of this pandemic is a digital business.
Digitalization becomes the way of choice for businesses to deal with the ongoing crisis as a result of the pandemic. More new e-commerce ventures will emerge and that it will be the new norm of doing business.
If you have a physical store, try to think about how to take it online.
If you don’t have a physical store, that’s good because you can ditch paying rental and only focusing on creating an online business.
Nowadays, even I have changed. I have done my grocery shopping online and deliver to my doorsteps. And I firmly believe this is the future.
b. We can spend LESS and SAVE more.
Yes. You hear it correctly. We have to go back to basic. Spend less and save more.
You know, when you want to buy that fancy dress or clothes. Don’t. Wear the one in the closet.
Or when you want to buy RM20 coffee. Don’t. Make your own. Dalgona coffee is cheap and delicious.
Or when you decide to splurge on the expensive seafood. No. Save it. You can eat chicken or any less expensive meat.
The reason to save more is to have more cash by your side during this challenging period. I hate to say this, but Cash is King during this period.
That’s why you can see many rich people selling off their stocks or investment product to keep the cash and have more liquidity during this time. And by the end of the day, we all need money to use for necessities and living costs.
c. We can LEARN new skills.
Currently, the best investment product if you don’t have cash is yourself. Learn a new skill; digital skills are highly sought out now.
For the best part, you can learn most of the digital skills by taking a FREE online course or searching online.
Youtube and Google are the best “school” of our generation. Go to Youtube or Google search for your teacher. Search for your niche or subject you want to learn and follow the channel or website. Be a student.
Once you have learned the skill, try to find a freelance job online, and expand your horizon and income.
Studies showed about 60% of Malaysians might not have the means to raise even RM1,000 for household expenses if they lost their jobs abruptly. It means that 60% of Malaysian households are below the living wage.
So, by getting these new skills, you can get a passive income, pay some debts, or even increase your savings.
Isn’t that great? The idea of investing in yourself. I love it!
d. We can reduce our debts.
There’s no way to save money on everything, as you’d still have to spend to survive. So, it’s time to re-evaluate your existing debts.
Notably, the one that carries the highest interest rates, like credit cards and personal loans.
Find a way to pay the accounts fully or, if possible, try to stop incurring new debts or expenses.
If your income is affected during a recession, your ability to pay off your debts may be compromised.
If you’re carrying a lot of high-interest debt, you’ll need a plan to deal with it immediately. This could include reducing expenses to pay off more debt, consolidating your debts under a lower interest rate, or both.
e. We can Diversify our income.
There is no harm to diversify your income. You can have a side gig to cover some of your expenses or accumulate your savings and even come to your rescue when you lose your main source of income.
We are living in a great digital era where many things can be done online. It’s never been easier to sell a product or offer freelancing services.
According to our ex-finance minister, Daim Zainuddin said Malaysia could not escape a recession.
Covid-19 has forced society into completely changing our daily norms, and put all the weaknesses of every business, government, and community out on display.
We have been given an opportunity to pause, take stock, recalibrate our values, our relationships not only with our fellow mankind but with nature too, and rethinking our priorities in life.
It is our chance now to take steps to improve what we can and change what we must for the sake of a better future.
We can and we will.
Malaysia Boleh!
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