Sluggish growth, job losses predicted during MCO

PETALING JAYA: Several economists are concerned that the movement control order (MCO) announced yesterday will cause unemployment to rise and economic recovery to be dampened.

Carmelo Ferlito of the Centre for Market Education predicted that Malaysia would see “more unemployment and more businesses closing down”.

He said small- and medium-sized enterprises were just beginning to recover from last year’s MCO and were now particularly vulnerable.

“In a nutshell, we are undermining the seeds of the recovery that have started to emerge,” he said.

“We will not reverse this trend and more businesses will leave for Vietnam and Indonesia, where there are no new restrictions to businesses but even more openings for FDIs (foreign direct investments).”

Data released by the Department of Statistics yesterday showed that Malaysia’s unemployment rate had risen by 0.1% month-on-month to 4.8% in November, with 764,400 without work.

Ferlito alleged the government had imposed the new lockdown in order to avoid snap elections.

He challenged Putrajaya to disclose scientific data that would support its projection that the country could, by mid-March, record 8,000 new Covid-19 cases a day.

He said the harshest lockdowns in Europe had not produced significant results. Closer to home, he added, Thailand had destroyed nearly a quarter of its economy due to similar restrictions.

He also said it was doubtful that Malaysia’s Covid-19 situation would be vastly different in the next two weeks.

Shankaran Nambiar of the Malaysian Institute for Economic Research warned that the MCO might be extended after a fortnight.

He said the government might not be able to “comfortably” support damage to the economy because of legacy issues.

“Fiscal prudence has never been valued and the economic guardians have never planned for extreme stress,” he said.

“The option now is to prepare for distress and to concentrate on rebuilding an economy that will endure damage until widespread vaccination is administered.”

Prime Minister Muhyiddin Yassin yesterday announced an MCO for five states and the federal territories and a ban on interstate travelling in a bid to stem the rise in Covid-19 cases. He said the country’s healthcare system was at “breaking point”.

Goh Lim Thye, an economics lecturer at Universiti Malaya, said another MCO might be the only move the country could count on to contain the virus, but he added that the economic impact was worrying.

He said the country’s economic climate in 2019 put it in a good position to ride the MCO-induced downturn in 2020.

“In 2019, Malaysia’s economy registered a growth rate of 4.3% with a total value of RM1.42 trillion at constant prices,” he said.

“The unemployment rate was at 3.3% and direct debt stood at RM793 billion, or 52.5% of the GDP (gross domestic product).

“But in 2020, the Malaysian economy was expected to contract by between 4.5% to 5.5%, the unemployment rate registered in the third quarter was at 4.7 %, and direct debt stood at RM874.3 billion, or 60.7% of the GDP as of the end of September.

“Hence the economic data does not seem to favour MCO 2.0.”

​Bank Islam Malaysia chief economist Mohd Afzanizam Abdul Rashid also said the MCO would slowdown economic recovery.

“But we believe the impact may not be as severe as the first round MCO commencing March 18 and ending in early May 2020,” he said.

“Back then, the implementation was nationwide. This resulted in the GDP plunging 17.1% in the second quarter of 2020 as economic activities almost ground to a halt.

“As such, we could see possible revisions in the current GDP projection of between 6.5% to 7.5% for 2021, which was made in November last year.”