Covid-19 Exit Plan: The Road to Recession?

The PM with a new name – Mahiaddin Yasin – announced Malaysia’s Covid-19 exit strategy on 15 June 2021. There is a list of targets to be achieved, not a strategy of how this is achieved nor a plan to assist those who are already vulnerable.

The key criterion for exit must be “herd” immunity not the number of new cases or ICU beds. Look at the U.S. or the U.K. it is the herd immunity – whether it is 60% or 70% of the population (being vaccinated).  Many are not clear if all three conditions – cases, bed usage, vaccinations – must be met before moving into the next phase. Or, is this deliberate? That allows for continuation of a phase by another month or two, if say one condition is not met.

Nonetheless, it has costs. Some have estimated cost of lockdown at RM107 billion for two weeks! (Paulo Casadio and Geoffrey Williams, FMT). And according to them with the new exit strategy the cost will balloon to RM170 billion or about 12% of GDP.

The SME Association had said 100,000 SMEs closed in 2020 and another 50,000 based on current lockdown. The Entrepreneur Development and Cooperatives Ministry (June 4) said more than 90% of micro SMEs risked closure with 54% saying they may only survive 3-6 months and 72% expect to suffer losses. This is now a prophetic statement to be fulfilled by the exit strategy.

What can be done? A further fiscal injection of 10% of GDP (or approximately RM150 billion) will be required. This must focus on the B40, M40 households and the SMEs. In some way, this will reduce the certain disaster faced by hotels, tour operators, airlines ,airports, retailers,  property agents, hair salons, consultancies, training companies and a whole host of other services that are either shut or on Work from Home. Meanwhile, rental, revenue, wages, debt payments remain issues.

Will the MoF now consider a loan moratorium to end 2021? Or, is the Government inducing a recession by its actions?

 

References:

1. Covid-19 exit plan-tipping into a recession, Paolo Casadio and Geoffrey Williams, FreeMalaysiaToday, June 15, 2021

 

2. A look at Muhyiddin’s roadmap to recovery, Imran Ariff, FreeMalaysiaToday, June 15, 2021