Economists in Malaysia have foreseen a banking crisis in the next few months and have urged the government to take quick actions to set up an organization to ease the potential economical crisis before it’s too late.
Kameel Mydin Meera, an experienced economics and finance professor at International Islamic University Malaysia, mentioned that the organization he was proposing should monitor the rapid increase in bankruptcies and foreclosures which is expected to happen in the next few months.
He told FMT the banking crisis would be an indicator of the bankruptcies and foreclosures, thus bank merges are expected to take place.
The Malaysian government had offered a six-month debt moratorium during the MCO (movement control order) to Malaysians so they can delay their monthly repayments on housing and business loans and ease their financial problems.
Kammel said, “Once the six-month debt moratorium is over in September, the whole situation is going to be different.”
He also claimed that Malaysia will be heading for one of the worst economic recessions of all time and the recovery phase may take up to two years. Almost every single Malaysians will be affected by the consequences of the recession.
He highlighted that the construction sector which had already gone downhill even before the COVID-19 pandemic might be heading for another round of downhill.
Many experts foresee that prices of houses and properties will have a drastic decrease, and Kameel backed up this statement by saying the demand for business premises will decrease due to consumer behaviours shift, where the crowd shifts from traditional ways of daily style towards e-commerce, online meetings and online education.
Kameel even suggested that the government should provide more funds through stimulus packages to ensure market liquidity and stimulate spending power.
“Liquidity is not about how much money is in the system, but how easily people can transact in the economy,” he said.
“Both the supply and demand shocks from the MCO, have affected market liquidity.”
“There were complaints that in the previous stimulus packages, many businesses did not get the promised help,” he said, adding that funds that are distributed should be transparent in every aspect.
Kameel suggested that the government should create more jobs in the technology industry, a sector that many have claimed has the potential to grow rapidly after the pandemic.
He claimed that the digital economy will have high liquidity due to its inclusivity, and he suggested for cheaper access to transportation and communication networks. By increasing the accessibility to both sectors, Malaysia will be able to recover from a recession as quickly as possible.
Economist, Hoo Ke Ping, said the Malaysian economy will show its true face in September 2020, when the country enters the third quarter of the economic year.
“If the economy continues to contract, then we will be in a full-scale recession,” he said. “But if the economy improves even slightly by September, then we may escape recession but we will still head towards a weakened economy.”