Malaysia reports fallout from Iran war as industries get hit

[KUALA LUMPUR] Malaysia is starting to see the economic impact from the Middle East conflict across several sectors, with disruptions expected to deepen in the coming months.

The number of workers who lost their jobs rose 21 per cent to 7,057 in April from March, Economy Minister Akmal Nasrullah Mohd Nasir said at a briefing on Monday (May 25). While the job cuts were worse in January and February, “this development deserves attention,” he said. Malaysia’s unemployment rate stood at 2.9 per cent in the first quarter.

In the aviation industry, daily aircraft movements in April declined 31.5 per cent following the cancellation of some Middle Eastern routes, Akmal said. Meantime, international air cargo handling fell 14.3 per cent, while domestic air cargo fell 18 per cent following a surge in fuel costs and airline operational adjustments.

Trading volume in the agricultural sector declined 14.7 per cent in the first quarter, with a drop in exports across major commodities, including cocoa, rubber, palm oil, pepper and timber, the minister said. He added that exports in the sector are set to shrink by about 13.5 per cent this year, while imports will likely decrease by about 3.3 per cent. 

Logistics, namely shipping costs to the Middle East, have jumped by 50 per cent to 80 per cent, Akmal said. Plantation and machinery operating costs have increased by as much as 30 per cent and rubber replanting costs have increased by as much as 55 per cent. The cost of producing palm oleochemicals has increased by up to 30 per cent, according to the minister. 

Akmal had warned last week that the impact of the global supply crisis on the country is expected to be more pronounced in the third quarter. The economy’s pace of expansion was already softening progressively across the first quarter, with monthly growth easing from 6.8 per cent in January to 5.2 per cent in February and 4.1 per cent in March. BLOOMBERG