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 SMEs 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.

Carmelo Ferlito.

“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.”

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.

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.

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 per cent 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.

“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.”

Mohd Afzanizam Abdul Rashid.

Bank Islam Malaysia chief economist Mohd Afzanizam Abdul Rashid also said the MCO would slow down 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.”

Business leader says longer MCO will lead to chaos

Koay Chiew Guan and Michael Kang say small businesses will be badly affected if the MCO is prolonged.

PETALING JAYA: Two business leaders have cautioned against an extension of the two-week lockdown in some states which comes into force on Wednesday.

Koay Chiew Guan, immediate past president of the Small and Medium Enterprises Association, said: “Two weeks is still okay, hopefully they don’t prolong it. If they do, it will be more troubling, the whole country will be thrown into chaos.”

During the MCO lockdown, only essential services and five economic sectors will be allowed to operate: manufacturing, construction, services, trading and distribution, as well as plantations and commodities. Workers in non-essential services must work from home.

The restrictions apply to Penang, Selangor, Kuala Lumpur, Putrajaya, Labuan, Melaka, Johor, and Sabah from Jan 13-26.

Koay said government subsidies on rent and salaries, or a loan moratorium, would have been appreciated to account for the drop in income many businesses will experience.

“Hardest hit are the small companies and businesses, like restaurants, they have no customers for dine in, so for them it will be more hardship.”

He said circumstances should not become too dire if the MCO is not extended.

Another small business leader, William Ng, said the government should immediately provide an automatic extension for all statutory requirements such as renewal of business licenses and submission of annual returns.

Extended subsidies on wages and rents should be provided if the MCO is extended beyond two weeks.

Ng is central region chairman of the Small and Medium Enterprises Association Malaysia.

MCO won’t end Covid-19 crisis, says association

He said the association would have preferred a more targeted approach to managing the numbers of Covid-19 infections instead of a blanket MCO.

Last year, the federal government earmarked RM10 billion in aid to help small enterprises during the national MCO lockdown from March to July.

Michael Kang, president of the SME Association of Malaysia, said he hoped the government could come up with effective wage and rent subsidies.

Kang predicted that 30-40% of the country’s SMEs “will be gone” if the MCO were to be extended for another two months.

He said businesses suffered losses of an estimated RM2.4 billion each day during last year’s MCO and SMEs had already had to burn “a lot of cash” during the period.

He hoped the government would find a long-term solution to the Covid-19 crisis instead of resorting to continued lockdowns.

“We need a solution to live with Covid-19. Not MCO,” he said. “It’s not like Covid-19 will disappear with the MCO.”

MEF says government support crucial for companies’ survival

The Malaysian Employers Federation urged the government to consider reintroducing the employment retention programme, wage subsidy programme and loan moratorium, especially for small and medium enterprises.

MEF president Syed Hussain Syed Husman said the survivability of most companies hinged upon the support received from the government.

Syed Hussain said the measures introduced in March 2020 should be reintroduced, as the current wage subsidy programme was only applicable to the hotel and retail sectors.

Won’t be as bad as last year, says MTUC

Malaysian Trades Union Congress deputy president Mohd Effendy Ghani said the partial lockdown was only in some states, and other areas would not feel as big an impact as the national lockdown in March last year.

“Compared to the first MCO, when everything stopped, at least some sectors are allowed to continue operations, which will be better for workers and the economy.”

Effendy said the government needs to be clear in their messaging to ensure workers and employers comply so that further restrictions aren’t implemented

He urged the entire workforce to abide by the SOPs handed down, as poor adherence will lead to extensions or further restrictions being implemented.