AS the world continues to be gripped by the news cycle surrounding the Covid-19 epidemic, attention remains fixated on the plight of those infected.
The constant vigil over the well-being of those ill is in the thoughts of many but equally, governments are now switching their attention to the fallout from the debilitating outbreak that has crippled many facets of businesses.
Governments around the region are rolling out stimulus packages to buttress the affected industries and Malaysia is expected to do so soon.
How much the government will spend is important, given that Budget 2020 calls for the largest ever expansion budget, and which industries will receive help will be the attention of any stimulus or bailout packages.
Tourism, retail and the aviation sectors are said to be the focus of the emergency spending by the government as those industries are the worst-hit from the financial impact of the Covid-19 outbreak.
With just over a month left for the first quarter of the year, the impact on businesses is getting more severe even as the number of people recovering from the infection starts to rise.
That is significant as the number of tourists from abroad has gone down and the immediate impact will be that Visit Malaysia 2020 is off to a rocky start.
With China nationals banned from travelling abroad, that is going to see the overall number of tourists taking a huge hit as the Chinese accounted for 11% of tourist arrivals last year and that was expected to rise this year.
Even Singaporeans are not travelling as much across the Causeway if photos of the near-empty link at rush hour is taken at face value.
Tourist money is an important part of sustaining a large number of businesses and employees, which adds to the foreign exchange reserves of the country and contributes to GDP growth.
With that vanishing, focus must now be on what the government can do to get domestic growth going from internal means.
That is critical as GDP growth in the fourth quarter of 3.6% was below expectations and it is hard to imagine growth being higher than that in the first quarter of this year, which will feel the immediate brunt of the Covid-19 outbreak.
Businesses are affected as the supply chain in Malaysia is very much linked to what China’s producers can generate. With businesses in China off to a stuttering start and workers slow to return to work after the Spring Festival break, resulting in below-optimum manufacturing levels, that is going to impact on what our producers can make.
With the mining and plantation sectors being consistently underperforming in terms of value-added over the past two years, much will then rest on domestic consumption and investment, and the services sector.
The instant remedy is to get people to switch to domestic travel to spur the hospitality industry.
Malaysia is a bountiful country of much natural and historical beauty and diversity, and many Malaysians can find our beaches and flora and fauna as compelling as anywhere else in this region.
We can see the airlines already reacting by cutting down fares and launching attractive domestic travel packages.
Supporting the airlines through the stimulus package is important, given the role they play in ferrying passengers to and within Malaysia, and also indirectly by giving a base for the MRO (maintenance, repair and operation) industry that the government is trying to develop as a pillar of industry for the economy.
With retail associations asking for rental rebates, it is wise for the mall owners to heed their requests.
It is then important to see what the government can do when it comes to bringing help through the stimulus package.
China’s influence today on Malaysia’s economy is far greater than during the SARS episode in 2003 when the government then pumped RM8.1bil into the economy to bolster economic growth. Any package this time is expected to be larger with many industries feeling the pressure from supply and demand shocks, especially the SMEs.
Higher spending and with tax collection undoubtedly expected to be hit this year, this will result in the fiscal deficit ballooning beyond plan. But rating agencies will understand the reasons for doing so.It is time to soothe the economic shock from Covid-19. Let’s support Malaysia and her businesses.
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