Free «Concepts, Effects and Implications of Recession for Various Sectors in Malaysia» Essay Paper

Economic recession is a protracted decline, e.g. one year, in a country's economic activities and Gross Domestic Product. During this time, there is a change in major areas of the economy, such as an increase in unemployment, decrease in production, a drop in real income and dwindling wholesale and retail sales.

Recession-Proof Economic Sectors of Malaysia

Even though inflation takes a toll on most major sectors of the economy, such as the manufacturing sector, certain sectors remain recession-proof. In Malaysia, the mining sector, the agricultural sector, tourism sector and transport sector tend to remain stable in times of a financial crisis.

The Agricultural Sector

This is a sector that has proved its resilience in times of recession. It has also received constant support from the government aimed at boosting palm oil production. The government has also lowered agricultural and industrial activities, such as the use of chemical inputs that affect palm oil yields (Rahimatsah, 2007). Other legal and regulatory frameworks implemented in Malaysia govern the agricultural and environmental management initiatives meant to spur governance of sustainable growth (Azmi, 2006). They include the National Agricultural Policy (NAP), National Environmental Policy, National Conservational Strategies, as well National Policies on Forestry and Biodiversity (Tan et al, 2007). The policies are product-oriented and intend to increase the economic yield gained from agriculture. They safeguard and expand land meant for agricultural use, as well as offer incentives to agriculturalists. They, therefore, make it easier and more profitable for commercial farmers to produce more agricultural goods for export.

 

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Small and Medium-Sized Businesses Growth

These benefit from recession due to low competition posed by larger firms. Small-sized businesses are easier to run and make a profit; their growth level is also on par with major market players. Larger firms find it hard to lower prices, because they already experience loss of income due to declining sales. Smaller firms can, therefore, trade comfortably at prices similar to those charged by larger firms; and with proper management they can rise to the top.

The Banking Sector

This sector may benefit from the liquidation of assets by large firms and subsequent deposits they make in banks and financial institutions. This will also be accompanied by a rise in savings made by middle and small-income customers as a result of decreased spending. Commercial banks also benefit from some of the measures put in place by the central bank in order to retain investors' money in the country (Jomo, K and Wee, 2004). They, therefore, have a good capital base to cushion them during the crisis.

The Tourism Sector

This sector may also remain resilient to recession, given that tourists from economically stable countries may rush to profit from the diminishing value of the local currency. The government may also put measures in place to boost the sector in order to avert the prevailing deterioration in national income.

The Social Sector

The education sector is one of the social sectors that tends to remain resilient during recession. This stems from the fact that its major resource is labor, which becomes cheaper during recession. People may also start investing in formal education because of the negative indications that business gives them as a source of income.

Businesses that provide social services, such as night clubs and casinos, may also remain recession-proof because of habitual spending that most of their customers may exhibit. Companies that produce habitual goods, such as beer and tobacco products, may also withstand crisis fairly well.

The media sector also benefits from recession, since businesses resort to advertising as one of their survival strategies. Joblessness may also boost this sector, as unemployed people seek to occupy themselves, as well as use the media to search for employment opportunities. Strategists also seek information on market trends and signals of economic recovery through the media.

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People tend to gather in social units in times of crisis, and economic recession is no exception. Retrenched people may resort back to their family units, and social spending may take a toll on them.

The Mining Sector

This sector contributes significantly to Malaysian exports. Malaysia is one of the largest tin-producing countries in the world. The loss of value of its currency makes foreign investors consider investing in the country’s mines in order to gain profit in the short run. The country also has substantial oil and gas reserves. Demand for energy worldwide guarantees ready market for such goods, even in times of recession.