The expectation was Malaysia is to recover in 2021. Projections of 7%-7.5% for GDP were touted by many learned economists. No-one expected another round of MCOs or a State of Emergency! What is the implication?
Many say MCO 2.0 is only for two weeks and hence GDP growth will be impacted by a lower growth rate of 6.2% instead of 7.0%. In other words, the drag on GDP is perhaps 0.7% to 0.9% for 2021. According CGS-CIMB Research, the estimated daily economic losses due to MCO 2.0 is RM 750 million, higher than RM 200 million incurred daily under CMCO. That translates to RM 10 billion for a two- week shutdown or 0.7% off from projected GDP of 7.5%. If you allow health experts to rule, MCO will be extended by another 4 weeks or a total of 6 weeks for shutdown. That may translate to a “loss” of RM30 billion or a reduction of approximately 2% in GDP terms. So, growth may only be 5-5.5% for 2021. Sectors impacted will include wholesale and retail trade, restaurants, hotels, recreational services and leisure.
Fitch Solutions said in Focus Malaysia (12 January) that the state of emergency has mixed prospects with risks pronounced if Government takes the opportunity to push through legislation or measures that are inherently unpopular. Many have questioned the need for an emergency in the first place. Covid-19 is not a reason for emergency, otherwise Trump would have imposed one a long time back and avoided the election.
Dr. Musa Mohd. Nordin writing in Malaysiakini (12 January), suggested some best pandemic practices and these include ramped up-testing; triaged mass screening; contact tracing in digital mode; data sharing; improving healthcare capacity; and, enhancing public health initiatives. It is to MOH’s credit if it can harness ideas locally and abroad.
Meanwhile, our present trajectory suggests more SMEs floundering, unemployment rising above 1.0 million, domestic consumption declining, and private investments postponed further.
With an Emergency, we have FDIs dropping off, DDIs remaining stagnant, exports curtailed and a sense of gloom up to August 1, 2021. This time around, there is no talk of moratorium (maybe crematorium!), fiscal stimulus and support measures to stem business decline.
Why must we self-destruct the economy when there are other practical ways to stem Covid-19, especially with vaccines now being available?
1. Tan Siew Mung, These are the sectors that will be affected by MCO 2.0, according to CGS-CIMB, 12 Jan 2021, The Edge
2. Cheah Chor Sooi, Fitch Solutions: Lockdown will likely last longer than two weeks, 12 Jan 2021, Focus Malaysia