MCO throws spanner in recovery

Shoppers in Kuala Lumpur rushing to buy a few essential items before the movement control order on Jan 13. Photo: Daisy Rita Savarimuthu

PETALING JAYA: Many economists previously warned that Malaysia could not afford another lockdown but with four-digit Covid-19 daily cases recorded since end-November 2020, they said the government is running out of options to contain the deadly virus outbreak.

Economists said the movement control order (MCO) commencing tomorrow is less stringent compared with the previous MCO implemented on March 18,2020.

Hence, while the latest round of the MCO would slow the expected economic recovery this year, the impact could be less severe.

However, this depends on the types of businesses allowed to operate and whether the MCO will be extended beyond the initial two weeks.

According to Alliance Bank chief economist Manokaran Mottain, the gross domestic product (GDP) growth in the first quarter of 2021 would take a hit, compared to his earlier projection of 2.4%.

“However, a positive GDP growth remains possible in the January-March 2021 period if the MCO is not extended beyond Jan 26. If it’s only for two weeks, the impact will be limited, ” he said.

Given that businesses under five essential economic sectors have been allowed to continue operating, Manokaran expects this to be helpful in further reducing the impact of the MCO.

“We have to wait for the guidelines from the International Trade and Industry Ministry (Miti) to specifically see which businesses would come under the essential economic sectors, ” he said.

The five economic sectors are manufacturing, construction, services, trade and distribution as well as plantation and commodity.

MIDF Research previously estimated that the economy would see an output loss of RM28.8bil or 1.9% of the GDP if a targeted enhanced movement control order is implemented in the Klang Valley lasting for up to one month.

Manokaran urged there should be leniency in allowing small and medium enterprises (SMEs) to operate, in order to ensure that they could remain afloat despite the 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 would slow down 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 MCO commencing March 18,2020 to early May 2020.

“Having said that, we could see a revision in current GDP projection of between 6.5% to 7.5% for 2021 which was made in November last year.

“As for the first-quarter GDP performance, a positive growth is not something we can totally rule out, although it depends on how the containment measures would be implemented, ” he said.

Mohd Afzanizam, however, welcomed the government’s decision to introduce the MCO, considering the current Covid-19 conditions and the effects on the national healthcare system.

Meanwhile, industry leaders are relieved that the government has not announced a full lockdown that could bring the entire economy to a standstill.

In a statement, the Federation of Malaysian Manufacturers (FMM) thanked the government for taking heed of the call of the industry by allowing the five key economic sectors in the six states declared to be under the MCO to continue to operate with strict conditions and standard operating procedures.

“However, we note as announced by the Prime Minister, Miti will further announce and clarify the finer details of the operations allowed during this MCO period.

“We look forward to the expeditious release of the details to allow enough time for the industry to plan and adjust to the required conditions.

“It is most important that the process and procedure to operate are seamless and clear for fast implementation. FMM will issue an advisory to our members upon receiving the announcement on the details by Miti, ” according to FMM president Tan Sri Soh Thian Lai.

With the national healthcare system pushed to the breaking point, Prime Minister Tan Sri Muhyiddin Yassin announced the enforcement of a new MCO for a fortnight effective midnight Wednesday until Jan 26.

In a special televised address to the nation yesterday, the premier has also hinted that the MCO may be extended beyond Jan 26, depending on the severity of domestic Covid-19 cases.

Six key states, which contributed over 60% of the national economy in 2019, would come under the MCO whereby inter-state and inter-district travels are banned. These are Selangor, Penang, Johor, Sabah, Melaka and the three federal territories (Kuala Lumpur, Putrajaya and Labuan).

Secondly, conditional MCO will be enforced in Pahang, Perak, Negri Sembilan, Kedah, Terengganu and Kelantan. Recovery MCO will be implemented in Perlis and Sarawak.

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