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PETALING JAYA: Many economists previously warned that Malaysia could not afford another lockdown, but with daily four-digit Covid-19 cases on record since late November 2020, they said the government is running out of options to contain the virus outbreak. mortal.
Economists said the motion control order (MCO) starting tomorrow is less stringent compared to the previous MCO implemented on March 18, 2020.
Therefore, while the latest round of the MCO would slow down the expected economic recovery this year, the impact could be less severe.
However, this depends on the types of businesses authorized to operate and whether the MCO will extend beyond the initial two weeks.
According to Alliance Bank chief economist Manokaran Mottain, growth in gross domestic product (GDP) in the first quarter of 2021 would be affected, compared to its previous projection of 2.4%.
“However, positive GDP growth in January-March 2021 is still possible if the OLS does not extend beyond January 26. If it is only for two weeks, the impact will be limited,” he said.
Given that companies in five essential economic sectors have been allowed to continue operating, Manokaran hopes this will be helpful in further reducing the impact of the MCO.
“We have to wait for the guidelines of the Ministry of Industry and International Trade (Miti) to see specifically which businesses would enter the essential economic sectors,” he said.
The five economic sectors are manufacturing, construction, services, commerce and distribution, as well as plantations and commodities.
MIDF Research previously estimated that the economy would see a production loss of RM28.8bil or 1.9% of GDP if an enhanced motion control order is implemented in the Klang Valley lasting up to a month.
Manokaran urged that there should be leniency in allowing small and medium-sized enterprises (SMEs) to operate, in order to ensure they can remain afloat despite travel restrictions.
SMEs represent over 98% of local businesses in Malaysia.
Bank Islam Malaysia Bhd Chief Economist Mohd Afzanizam Abdul Rashid also believes that the country’s economic recovery will slow this year as key states will be under the MCO.
“Despite that, we believe the impact may not be as severe as the first round of MCO that started on March 18, 2020 through early May 2020.
“That being said, we could see a revision in the current GDP projection of between 6.5% and 7.5% for 2021 that was made in November of last year.
“Regarding the performance of the GDP in the first quarter, positive growth is not something that we can totally rule out, although it depends on how the containment measures are implemented,” he said.
However, Mohd Afzanizam welcomed the government’s decision to introduce MCO, considering the current conditions of Covid-19 and the effects on the national healthcare system.
Meanwhile, industry leaders are relieved that the government has not announced a total lockdown that could paralyze the entire economy.
In a statement, the Federation of Manufacturers of Malaysia (FMM) thanked the government for heeding the industry’s call by allowing the five key economic sectors in the six states declared under the MCO to continue to operate under strict conditions and standards. operating procedures.
“However, we note that, as announced by the Prime Minister, Miti will announce and clarify the finer details of the operations allowed during this MCO period.
“We hope that the details will be released quickly so that the industry has enough time to plan and adapt to the required conditions.
“It is very important that the process and procedure to operate are perfect and clear for quick implementation. FMM will issue a notice to our members upon receipt of the announcement about the details of Miti, ”according to FMM President Tan Sri Soh Thian Lai.
With the national health system pushed to the limit, Prime Minister Tan Sri Muhyiddin Yassin announced the application of a new MCO for fifteen days from midnight on Wednesday until January 26.
In a special televised speech to the nation yesterday, the prime minister also hinted that the MCO may extend beyond January 26, depending on the severity of domestic Covid-19 cases.
Six key states, which contributed more than 60% of the national economy in 2019, would be under the MCO, under which travel between states and between districts is prohibited. These are Selangor, Penang, Johor, Sabah, Melaka, and the three federal territories (Kuala Lumpur, Putrajaya, and Labuan).
Second, conditional OLS will apply in Pahang, Perak, Negri Sembilan, Kedah, Terengganu and Kelantan. MCO recovery will be implemented in Perlis and Sarawak.
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