Travel and tourism is a crucial contributor to Malaysia’s economy. But what economic impact is the coronavirus outbreak having on these sectors?
March 25, 2020 | AtoZ Markets – Due to its close trade ties with China and Singapore, which top the list of countries with coronavirus, Malaysia could feel the spill-over effects of the coronavirus impact.
Following the initial coronavirus response measures, the number of coronavirus cases in Malaysia has started to stabilize. Nevertheless, earlier prevention could have reduced the cases further.
Coronavirus cases in Malaysia
Confirmed coronavirus cases in Malaysia surged after March 5. The cases increased sharply by 80% to 428 on March 15, compared to 238 on the previous day, and further to 1,306 on 23 March. The latest cases are reported from a religious gathering, which was attended by 16,000 people including 14,500 Malaysians.
Malaysia reported 172 new coronavirus cases, taking the total to 1796, the highest in Southeast Asia. Malaysia also reported the first deaths due to coronavirus in the country on 17 March. A total of 11 deaths have been reported in the country. The first human-to-human transmission of coronavirus in Malaysia was detected on 12 March causing concerns of the pandemic spread.
As a result, Prime Minister Muhyiddin Yassin said that Malaysia will extend a two-week restriction of movement order. He added that the country will also unveil a second economic stimulus package as the number of coronavirus cases continues to climb.
How is coronavirus affecting the economy of Malaysia?
Malaysia’s economic growth has slowed down to 4.3% in 2019. That is the lowest since 2016 and below the average 5.4% growth rate recorded since 2010. Economic growth in Q4 2019 was the lowest in ten years, at 3.6%.
The Central Bank of Malaysia, Bank Negara Malaysia announced that the COVID-19 pandemic will affect Malaysia’s economic growth in Q1 2020. The bank announced a cut in the statutory reserve ratio (SRR) by 100 basis points to 2% on 19 March. It also released 30 billion ringgit ($6.81bn) into the banking system.
Since last week, Malaysia has closed its borders to travelers. The government also restricted internal movement and ordered schools, universities and non-essential businesses to shut until March 31.
Muhyiddin said movement restriction would extend to another two weeks to April 14. The reason is that Malaysia has not seen a decline in the number of new virus cases.
“I know you feel burdened but I don’t have a choice,” Muhyiddin told Malaysians in a televised address on Wednesday.I have to extend the Movement Control Order for your own safety.”
The government will also unveil a “more comprehensive, people-oriented” economic stimulus package on Friday, Muhyiddin said.
The package is an addition to the 20 billion ringgit ($A7.5 billion) stimulus announced last month. The stimulus will cushion the impact of the virus outbreak on tourism and other industries.
“Whether you are a taxi driver, a farmer, a restaurant owner … the government will ensure that you will all benefit,” Muhyiddin said, adding that food supply was “enough for everybody”.
COVID-19 impact on tourism and travel
Travel and tourism and associated sectors such as accommodation (hotels) are among the most affected sectors in Malaysia. This sector is apart from the oil and gas and other export-oriented industries. Export-related activities account for approximately 40% of the jobs in Malaysia.
Travel and tourism is a crucial contributor to Malaysia’s economy, with travel alone accounting for nearly 50% of Malaysia’s export trade in services. Annual tourist arrivals to Malaysia are approximately 27 million.
The coronavirus impact on the tourism industry in Malaysian will depend on how coronavirus spreads in Singapore than in China, because tourists to Malaysia are the highest from Singapore at approximately 39%, whereas those from China are at a lower 12%.
Human-to-human transmission of coronavirus in Singapore is currently higher. This, however, could lead to tour cancellations to avoid risk ultimately leading to a drop in tourists to Malaysia. According to Muhyiddin, the government also plans to carry out mass testing for the coronavirus in high-risk areas.
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