MCO extension likely, but with more lenient restrictions

KUALA LUMPUR: Economists warned the government should have a fair measure to control the outbreak while reducing the country’s economic losses.

However, economists said Malaysia would likely to extend its movement control order (MCO) beyond April 14 due to rising number of coronavirus (Covid-19) new cases.

Sunway University Business School economics Professor Dr Yeah Kim Leng expected there will be a gradual partial lifting of MCO for another two weeks after April 14.

“The government should consider a partial lifting for manufacturing, agriculture and mining sectors as long as it can identify safe zones for operators to resume their operations,” he told the New Straits Times (NST) recently.

It was reported that the government will decide on April 10 whether Malaysia would be safe to end the extended MCO beyond April 14.

Yeah said it was also vital for operators to comply with the government’s safety and health guidelines, while ensuring the zone free from the outbreak.

“If necessary, we may need to bear the economic impact of the MCO extension, although the government may consider easing some of the restrictions for sectors in safe zone,” he added.

Yeah said the management (operators) comply with safety and health regulation such as providing safety attire and mask and other safety equipment before resuming their operations.

“Operators must practice social-distancing and they must undertake regular tests to identify infected individuals with the cooperation of the health department,” he said.

Yeah said government can relax and be lenient on their restriction in particular for food and beverage industry and essential services to mitigate economic impact.

“A continued complete shutdown of operations will result in economic damage and jobs losses,” he cautioned.

Reuters reported that the World Health Organisation (WHO) expected the infected number of COvid-19 to peak in mid-April despite signs of a flattening of the infection curve.

WHO head of mission and representative to Malaysia, Brunei and Singapore Ying-Ru Lo said the curve could bounce back if control measures were lifted and if people did not continue to take protective measures.

Lo added that data on new infections had so far and additional surveillance measures did not suggest widespread community transmission in the country.

Yeah said MCO extension would partially restrict mass-gathering and public events.

“If MCO is extended, the gross domestic product (GDP) growth will likely fell below Bank Negara Malaysia’s forecast between -2.0 per cent and 0.5 per cent this year.”

Bank Negara said the forecast range was due to “necessary” global and domestic actions to contain the Covid-19 pandemic.

It added the implementation and subsequent extension of the MCO would dampen economic activity following the suspension of operations by non-essential service providers and lower operating capacity of manufacturing firms.

“Of significance, tourism-related sectors are expected to be affected by broad-based travel restrictions and travel risk aversion, while production disruptions in the global supply chain will weigh on the manufacturing sector and exports,” it said in its inaugural Economic and Monetary Review 2019.

Bank Islam chief economist Dr Mohd Afzanizam Abdul Rashid said the MCO extension would likely dependent on Healthy Ministry’s assessment.

“We have to understand that the main priority is health. We need to stop chain of infection. Otherwise, there will be more casualties.

“Therefore, it is important to ensure the economic stimulus package (ESP) will reach its intended target group in a timely and effective manner,” he told NST.

Mohd Afzanizam said better coordination among the federal and state governments as well as government-linked companies and agencies are critical in ensuring no one will be left behind.

“We recently revised our GDP forecast from 0.4 per cent growth to -1.5 per cent contraction. Hence, the fiscal stimulus alongside with accommodative monetary policies would help to stabilise the economic growth,” he said.

Juwai IQI chief economist Shan Saeed concurred that the MCO extension would be dependent on the flattening of the curve.

“The MCO has been quite effective in bringing down the cases on daily basis. The government is committed to remove the locked down and lift the MCO restrictions so that normalcy returns and people are back to work,” he told NST.

Shan expected slowdown in economic growth if the MCO is extended, citing that the local economy will recover by third or fourth quarter of this year.

“However, once the MCO is over, demand to move steadily and recover at a fast pace bolstering the GDP equation at the macro calculus,” he added.

Asian Strategy and Leadership Institute (ASLI) Centre of Public Policy Studies chairman Tan Sri Ramon Navaratnam said the list of essential goods services and professionals should be reviewed and extended.

“This is to break and remove supply chain bottlenecks for service and supplies. We have to ensure that any restriction of vital supplies do not create food and other essential services shortages, as inflation and cost of living can then increase,” he told NST.

Ramon said this in turn would reduce the good effects of government’s grants and allowances.

“The government should have constant consultations with the rakyat. Deficits will rise with more budget give away and so debts will grow.”

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