The Socioeconomic Impacts of Covid-19 in Malaysia
- The Socioeconomic Impacts of Covid-19 in Malaysia
Similar to the experiences of several countries in the region, Malaysia has endured resurgent waves of Covid-19 infections and the sporadic reimposition of containment measures. Since the first case of Covid-19 was detected in Malaysia in January 2020, the country has experienced three main waves of the virus and three major lockdown periods to date. The first and second waves, which emerged in January and late February 2020 respectively, resolved with a relatively low caseload, in part due to the nationwide movement controls enacted that March.1 However, a spike in new cases in early October 2020 from the Sabah region of east Malaysia launched a third wave. This new wave, exacerbated by the subsequent emergence of the Delta variant, led policymakers to impose a nationwide "total lockdown" in June 2021.2 As of August 26, 2021, new daily cases reached an all-time high of 750 cases per million people—by far the highest in the region at the time. This surge exerted heavy pressure on the national healthcare system, but it also created greater urgency for policymakers to accelerate the country's vaccination program. Consequently, the share of fully vaccinated individuals rose from under 47% at the end of August 2021 to 64% by the end of September 2021, allowing the Malaysian government to gradually loosen movement restriction measures by October 2021 (Figure 1).3
Overall, the imposition of these containment measures—coupled with external trade and tourism shocks—have had severe, wide-ranging economic impacts on Malaysia's economy, workers, and households. Despite the unprecedented scale of the government's economic stimulus measures, [End Page 35] the impacts of the pandemic have created longer-term "scarring" effects that will take many years to resolve. The remainder of this essay is structured as follows: the first section considers the impacts of the pandemic on Malaysia's economy and labor markets, the following section discusses the country's economic policy responses and their potential shortfalls, and the final section concludes with a brief outlook for Malaysia's recovery moving forward.
Click for larger view
View full resolution
Covid-19 Waves and Containment Measures in Malaysia
Source: Data from Hannah Ritchie et al., "Coronavirus (Covid-19) Pandemic," Our World in Data ≈ https://ourworldindata.org/coronavirus.
Economic Growth Impacts
The onset of the Covid-19 crisis has stalled Malaysia's economic growth and development by several years. In 2020, GDP plunged by 5.6% compared to the preceding year—the largest single-year decline on record since the Asian financial crisis in 1997 and the second-largest decline since Malaysia's independence in 1957. Primarily driven by a rapid fall in investment (fixed capital formation) and the export of goods and services, this contraction in economic output returned Malaysia's GDP to 2018 levels. Into 2021, economic growth continued to be weighed down by a third [End Page 36] wave of infections at the end of 2020 and the following round of movement restrictions that culminated in a nationwide total lockdown in June 2021. The reimposition of these strict lockdown measures severely delayed the nascent economic recovery observed in the second half of 2020, postponing earlier forecasts for recovery to pre-pandemic levels of GDP to 2022.
Overall, these pandemic-induced shocks to Malaysia's GDP have delayed its development target to surpass the World Bank's GNI per capita threshold for high-income economies. Before the onset of the pandemic, the World Bank projected in 2018 that Malaysia was on track to cross the high-income threshold by 2022.4 However, the collapse in Malaysia's GDP growth in 2020 has delayed this timeline by three years, with new baseline projections indicating that Malaysia will not achieve high-income nation status until 2025.5
Labor Market Effects and Poverty
Beyond economic growth, the Covid-19 crisis in Malaysia has devastated workers. In March 2020, the month the first movement restrictions were imposed, the headline unemployment rate rose to 3.9%—a figure higher than the annual average rate recorded during the peak of the Asian financial crisis in 1997 and the global financial crisis in...
