KUALA LUMPUR (Nov 6): Malaysia's unemployment rate is projected to decrease to 3.5% in 2021, compared with an estimated 4.2% in 2020, as the country’s economy is expected to rebound firmly in 2021 after a dismal economic performance in 2020 due to the Covid-19 pandemic, according to the Ministry of Finance's (MoF) Economic Outlook 2021 report.
The MoF said the Malaysian economy is expected to rebound firmly in 2021 in line with expectations of a more synchronised global recovery.
“[Malaysia’s] labour market [is] showing signs of recovery,” the MoF said.
According to the MoF, Malaysia’s economy, as measured by gross domestic product (GDP), is expected to contract by 4.5% in 2020 before rebounding between 6.5% and 7.5% in 2021.
The MoF’s 2021 Malaysian unemployment rate forecast of 3.5% is derived from an estimated 562.6 million unemployed persons in the country versus a labour force of about 51.91 million persons.
For 2020, the 4.2% unemployment rate forecast is based on an estimated 653.5 million unemployed persons versus a labour force of around 15.74 million persons.
Looking back, the MoF said the Malaysian labour market deteriorated in the first half of 2020 (1H20) as economic activities were severely disrupted by the Covid-19 pandemic-driven movement control order (MCO) to curb the outbreak.
The MoF said the unemployment rate soared to 4.3% during 1H20.
The MoF said the closure of business operations and cost-cutting measures undertaken by firms due to the MCO weakened aggregate demand, which resulted in lesser employment opportunities created compared to the pre-Covid-19 period.
"This caused a spike of 30% in unemployed persons, which led the unemployment rate to soar to 4.3% or 670,200 persons,” the MoF said.
The 1H20 labour force stood at 15.69 million persons, according to the MoF.
For more stories on the Economic Report 2020/2021, click here.