Malaysian businesses to feel the pinch from Singapore recession

The Singaporean economy has contracted 12.6% on a year-on-year basis. (AP pic)

PETALING JAYA: An economist has warned that Singapore’s slump into a recession will have wide-ranging consequences for Malaysia, the republic’s second largest trading partner after China.

Juita Mohamad of the Institute of Strategic and International Studies said Singaporean households were poised to save more and spend less on non-essential goods and services, which would leave an impact on various business sectors in Malaysia, including tourism.

Singaporeans topped international tourist arrivals (5,381,566) and tourist receipts (RM11.56 billion) in Malaysia for the first half of 2019, playing a vital role in contributing to the country’s economy.

Juita told FMT firms in Singapore that were currently “shifting into survival mode” were likely to downsize their operations.

Juita Mohamad

“As downsizing takes place, investments into Malaysia will be decreased drastically,” she said.

She also said the cutback on operations would leave Malaysian workers “temporarily displaced”.

Singapore on Tuesday announced that its economy shrank an unprecedented 41.2% in Q2 following Q1’s 3.3% decline. The figure is based on advance estimates by the country’s trade and industry ministry.

The Singaporean economy contracted 12.6% on a year-on-year basis. The ministry attributed this to the suspension of non-essential services and weak external demand amid the global economic downturn, both due to the Covid-19 pandemic.

Johor, which used to welcome thousands of Singaporeans every weekend for seafood, shopping and other services, will be especially hard hit.

A large portion of investments in the state come from Singapore. In a press interview last month, Johor Menteri Besar Hasni Mohammad said investments from Singapore rose 51% to RM1.68 billion last year.

Hasni also said 200,000 to 250,000 Malaysians commuted to work in Singapore every day. They are employed there in manufacturing, hospitality and other sectors.

Goh Lim Thye, an economics lecturer at Universiti Malaya, told FMT the Singapore recession would definitely hurt FDI inflows into Johor, but also its property market and consumer goods sector.

It would, in addition, deliver a blow to Malaysia’s hope of attracting more tourists, he added.

About 10.2 million Singaporeans visited Malaysia last year.

“We are hoping that the number of tourists from Singapore will gradually increase after the reopening of the border from Aug 10,” Goh said. “However, the recession will definitely be standing in the way.”

Malaysia and Singapore agreed on Tuesday to reopen their common border to allow essential business and official travellers to commute across the causeway from Aug 10 onwards.

The two countries have introduced what are called the Reciprocal Green Lane (RGL) arrangement and the Periodic Commuting Arrangement (PCA).

The RGL will allow travellers to cross the borders for essential business and official purposes while the PCA will allow citizens with long-term immigration passes to enter either country for work purposes.

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