Banking crisis imminent, warns economist

Economist Kameel Mydin Meera says the six-month debt moratorium is merely delaying defaults on housing and business loans.

PETALING JAYA: An economist has warned that a banking crisis is coming and urged the government to set up an agency to work towards lightening it.

Kameel Mydin Meera, an adjunct economics and finance professor at International Islamic University Malaysia, said the body he was proposing should monitor and address a surge in bankruptcies and foreclosures which he expected to happen in the coming months.

He told FMT the banking crisis would be an “indirect translation” of the bankruptcies and foreclosures.

“Bank mergers can therefore be expected to take place,” he said.

Kameel Mydin Meera

Referring to the six-month debt moratorium, Kameel said it had merely delayed defaults on housing and business loans taken by many borrowers who were now jobless.

“Once the moratorium is over in September, the scenario is going to be different,” he said.

He said Malaysia was heading for one of the worst economic recessions it had experienced in decades and recovery may take two years, with nearly all Malaysians feeling the pinch, the exceptions being civil servants and other workers on fixed salaries.

He noted that the production sector had been feeling the heat since March and said the construction sector, which suffered from a glut in the market even before Covid-19 hit, might be heading for worse.

Many experts have predicted a plunge in the prices of houses, and Kameel said there would be a “drastic drop” in the demand for business premises as people shift to e-business, e-meetings and e-education.

“People can now even buy ikan bilis online,” he noted.

He also said the government should take immediate steps to prevent any shrinking of liquidity.

“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 (movement control order), in a way, have destroyed liquidity.”

He suggested the injection of more funds through stimulus packages.

“There were complaints that in the previous stimulus packages, many businesses did not get the promised help,” he said, adding that transparency was needed in the way funds were distributed.

Kameel also suggested the creation of jobs in high-tech agriculture, a sector that many have said is poised to grow after the Covid-19 crisis.

Hoo Ke Ping

He said the money would be in the digital economy because of its inclusivity, and he called for cheap access to communication networks and also to transportation. Accessibility to both would speed up recovery from a recession, he added.

Another economist, Hoo Ke Ping, said the real state of the Malaysian economy would be clearer in September as the country enters the third quarter of the economic year.

“If the economy continues to contract, then we will be in full scale recession,” he said. “But if the economy picks up even slightly by September, then we may escape recession and head towards a very weak economy.”

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