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Publication | 2021

Malaysia Economic Monitor: Staying Afloat

 

There has been a marked surge in the prices of selected food items. The sharp increase in food items such as poultry and vegetables was driven by a shortage in supply, as adverse weather conditions and shortage of foreign labor have affected the production of fresh produce. The government is looking into measures to manage price increases, including organizing regular sales for basic necessities. While such measures may be effective in the short-term, medium-term measures are needed to reduce the impact of climatic volatility on agriculture output and food supply. 

The pandemic has exacerbated existing challenges faced by the poor and vulnerable, including informally employed workers. Lower-income, less-educated, and young workers were more likely to be exposed to employment disruptions. Moreover, informally employed workers were also more severely impacted by the pandemic. They face structural vulnerabilities including irregular income and precarious terms of employment, greater exposure to shocks, and incomplete insurance against risks. As a result, informally employed workers experienced higher food insecurity, economic uncertainty, and financial distress during the crisis. 

Although the economy is gradually recovering, the progress is uneven, leaving low-income households and informally employed workers more vulnerable. By November 2021, half of the people who became unemployed during the pandemic had returned to work. A quarter of those who continued working throughout the pandemic were no longer experiencing income reduction. These recent improvements were translated into improvements in socioeconomic indicators, including lower prevalence of food insecurity and higher share of online learning participation among children.  

Nevertheless, the adverse impact of the pandemic still lingers around the poor and vulnerable, with many low-income households and informally employed workers becoming less resilient and more financially vulnerable. Given the tendency to rely on harmful coping strategies, such as sale of assets and reduction in food consumption, poor and vulnerable Malaysians are expected to have diminished productive potential in the long-term

The pandemic has brought into sharper focus long-standing weaknesses in Malaysia’s social protection system, underlining the need for a robust and shock-responsive social protection system. In response to the pandemic, the government intensified a progressive social assistance response, including establishing mechanisms to deliver the benefits swiftly. Despite this, a significant share of those who are eligible have not received any assistance. Findings from both rounds of the HiFy survey show that about a quarter of lower-income households had missed out on various government assistance programs during the crisis. Even among recipients of government assistance during the pandemic, informally employed workers and their households experienced higher food insecurity, alluding to the insufficiency of current assistance programs compared to exacerbated needs for support. The government’s ability to provide meaningful assistance to the poor and vulnerable has been hampered by several weaknesses of the social protection system. These include low benefit adequacy, fragmentation of programs, non-standardized targeting, and the limited reach of social insurance especially among the poor. The exclusion among the poor in the receipt of COVID-19 assistance are in large part a consequence of these systemic weaknesses.