The pandemic, in particular, continues to cast a pall over 2020 – and beyond. The economy shrank 17.1 per cent in the second quarter, clocking its first gross domestic product decline1 since the Global Financial Crisis. Bank Negara Malaysia, the central bank, is expecting a full-year contraction2 of between 3.5 per cent and 5.5 per cent.


Against this backdrop, the 2021 National Budget3 is set to offer many people a lifeline. As the largest in Malaysian history, the RM322.54 billion Budget – “Resilient As One, Together We Triumph” – is aimed at bringing the economy back on track for growth. It will provide more large-scale income and reskilling support, as well as stronger measures to protect jobs and create new ones.

As we look back on 2020, here are four critical lessons to glean from the tumultuous year.

Invest well and widely

Driven by the US-China trade war and COVID-19, global stock indices crashed in March4 as many countries entered lockdowns, before rallying5 in the second half of the year. The action in stock markets has been fast and furious.

The lesson for investors, both at the individual and business level, is that volatility is here to stay. The overriding principle might be to invest in quality stocks, play the long game, and stay diversified.

Given today’s unpredictable landscape, managing risks has become even more crucial. Vary your investments across different asset classes or industries to avoid being caught in a single type of investment – this will serve as a hedge against future financial shocks.

For example, travel-related companies such as airlines have been struck harder during this pandemic than gold mining companies, while sectors such as healthcare and medical technology have seen a big boost.

It may be worthwhile to consider the potential impact of November’s Budget on your investments as well.

The significant government spending6 set aside for technology sectors, such as aerospace and electronics, and infrastructure projects could spell opportunities for growth. This comes on top of government measures to boost private investments and attract foreign direct investment.

For tailored advice on how to build and diversify your wealth, talk to your RHB Relationship Manager or step into any RHB Branch to learn about our wide range of investment products. LEARN MORE >


Save, save, save

The unprecedented nature of COVID-19 has seen governments worldwide shore up their economies with huge stimulus packages.

Malaysia is a prime example – Putrajaya has introduced RM305 billion worth of measures since the pandemic hit, not including an additional RM322.5 billion from Budget 2021.

Many governments have been able to support their economies thanks to their financial reserves. The same strategy should apply to individuals, households and businesses: Always have enough for a rainy day.

But a survey7 by the Department of Statistics showed that most Malaysians have savings that will last them only between one and four months. The self-employed, who make up about 20 per cent of the workforce, are the least protected – 71.4 per cent have savings that will last less than a month.

With COVID-19 shuttering businesses and leading to massive retrenchments, having adequate financial buffer is more important than ever.

One option is to set aside some spare cash for an emergency fund with RHB Fixed Deposit accounts or Current Accounts like the RHB Smart Account, which offers attractive returns of up to 2.85 per cent per annum – a secure way to maximise your savings. LEARN MORE >

Our Private Retirement Schemes also allow you to automatically set aside a portion of your income, starting from RM100, to save for the longer term. LEARN MORE >


Spend smart

For economies everywhere, the COVID-19 pandemic has underscored the need to protect livelihoods.

This is why under Budget 2021, RM6.5 billion worth of cash aid will be given out to 8.1 million recipients to ease their financial loads, adding to earlier support measures like the Prihatin Supplementary Initiative Package, where individuals were given up to RM1,000 in cash payments.

The government is also allowing those in the low-income group and micro companies taking loans of up to RM150,000 to defer loan payments for three months, while lowering income tax by 1 percentage point for those earning between RM50,001 and RM70,000 annually.

As Finance Minister Tengku Zafrul Tengku Abdul Aziz put it: “Understanding the issues and grievances of the people is the basic point. The well-being of the people remains paramount.”8

These measures will be critical for a country facing over RM1 trillion9 in household debt – largely the result of a culture of taking personal financing loans and credit cards to maintain lifestyle choices.

About 27 per cent of households in Kuala Lumpur earning less than the estimated monthly living wage (RM2,700 for a single adult or RM6,500 for a couple with two children) do so, according to a report10 by the World Bank’s Malaysia Economic Monitor.

All this points to one key takeaway: Spend wisely. Understand your expenses and be smart with your cash. Now may also be a good time to look for opportunities to convert short-term cuts in spending into long-term gains, such as by making investments into quality property or improving your own skillsets.

And if you do find yourself having to spend, make the most of it with credit cards like our RHB Cash Back Credit Card, which allows you to get the most value out of your daily essentials purchases with cash rebates of up to 10 per cent. LEARN MORE >

Health insurance is another thing you should not scrimp on now, as an increasingly indispensable form of protection against unexpected events. The RHB Life Protection Plan is an example of how you can help secure not just your future, but that of your loved ones. LEARN MORE >

Load up on resilience

When AirAsia carried out two rounds of retrenchments11 earlier this year, laying off over 2,000 of its employees, many people were saddened, but not surprised.

The pandemic has highlighted the vulnerability of jobs, even at the world’s best low-cost airline. This economic uncertainty has come with an unsettling sense of job and financial insecurity.

In times like these, resilience is key. Protect your finances by building different streams of income, be it through investing in property or equities. Supplement your earnings with the gig economy, or even start a new business.

Budget 2021 is making this easier by offering more support to entrepreneurs and small and medium-sized enterprises (SMEs).

For instance, RM150 million will go towards training programmes and assistance for 100,000 entrepreneurs, while a RM2 billion assistance and rehabilitation facility is being introduced to SMEs through banking institutions.

To support nationwide efforts, RHB has also set up the RHB BizPower/-i Relief Financing to help SMEs with cash flow problems by loaning working capital. LEARN MORE >

At the same time, hunker down and secure your rice bowl as best as you can. Consider taking online classes to improve your credentials.

The Budget has allocated RM1 billion to reskilling and upskilling programmes that will benefit 200,000 trainees, including RM100 million to provide training for workers affected by the closure of international borders.

For businesses, building a workforce of the future will also mean staying ahead of the game in a post-pandemic world.


Weathering the storm

The storms that raged in 2020 have driven home the importance of preparing for a rainy day. If nothing else, the hard lessons learnt will help us better weather future crises.

During these uncertain times, we at RHB will offer all the help we can. Our financial experts are ready to advise you on how to manage your finances. Make an appointment with your Relationship Manager or visit your nearest RHB Branch today.


Sources:
1 S&P Global Market Intelligence. Malaysia enters recession in Q2; central bank downgrades GDP outlook. Aug 14, 2020.
2 Channel NewsAsia. Malaysia economy contracts 17.1% in 2nd quarter, worst slump since 1998 financial crisis. Aug 14, 2020.
3 Ministry of Finance Malaysia. Budget 2021 Speech. Nov 6, 2020.
4 Forbes. Researchers Examined The 2020 Market Crash. Here’s What They Found. Sep 8, 2020.
5 The New York Times. ‘This Market Is Nuts’: S&P 500 Hits Record, Defying Economic Devastation. Aug 18, 2020.
6 EY. Malaysia Budget 2021. Nov 6, 2020.
7 The Edge Markets. The State of the Nation: Saving for a pandemic: How prepared are Malaysians? May 4, 2020.
8 Channel NewsAsia. Malaysia's budget for 2021 is its biggest ever. Will it cushion the impact of COVID-19? Nov 6, 2020.
9 The Star. Are Malaysian households overly indebted? Apr 11, 2020.
10 World Bank. Malaysia Economic Monitor. Dec 2019.
11 Today.Second round of layoffs at Malaysia’s AirAsia. Sep 28, 2020.
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