Fitch Solutions Country Risk & Industry Research has predicted that middle-class households will face a temporary disproportionate drop in their income levels due to the Covid-19 pandemic.

Based on official data, the Fitch Group unit estimated that 210,000 households from the upper-middle income category will fall into a lower income range due to the economic impact caused by the pandemic and the movement control order (MCO). The upper-middle income category is defined by the unit as those with disposable incomes of between US$25,000 to US$50,000 (approximately RM106,350 to RM212,700).

Fitch Solutions also projected that the average disposable income for Malaysian households will shrink by 8%, from RM102,460 in 2019 to RM94,053 in 2020. This is based on Fitch Solution’s own prior prediction that Malaysia’s economy will see a 2.8% contraction from 2019, as well as an expected increase in unemployment.

“The average Malaysian household will be squeezed by Covid-19 related lockdown measures, as well as the resultant economic crisis,” said the research house.

That said, Fitch Solutions also foresees a strong and rapid recovery for Malaysia in 2021, buoyed by the government’s stimulus packages to alleviate the economic slowdown caused by the MCO. It expects the Malaysian economy to expand by 5.7% next year, and for unemployment issues caused by the MCO to be fully resolved by 2022.

“Because of the before mentioned indicators, we foresee disposable incomes recovering to similar, pre-Covid-19 levels from 2021 onwards,” said Fitch Solutions.

The government had enforced the MCO in mid-March to combat the spread of the Covid-19 pandemic, and it was subsequently followed by the conditional MCO (CMCO) and the recovery MCO (RMCO). At present, the country is undergoing the RMCO, which is slated to end on 31 August 2020.

While the restrictions have helped with containing the pandemic within the country, it also brought various industries and businesses to a halt. Since then, the government has introduced several stimulus packages to provide financial relief to the people and to restart the country’s economy, namely the Economic Stimulus Package 2020, Prihatin Economic Stimulus Package, and the PENJANA Economic Recovery Plan.

(Source: Malay Mail)

• TAGS:
• Covid-19 Economy
• Fitch Solutions
• Fitch Solutions Country Risk & Industry Research
• Household Income
• Middle-Class Households