Stay home now or suffer longer economic repercussions, analysts warn

Extension of the MCO could result in small businesses being closed and low-wage earners losing their jobs

By NUR HANANI AZMAN / Pic By RAZAK GHAZALI

MALAYSIANS should adhere to the Movement Control Order (MCO) as the extension of the order may hurt the local economy further.

Economists warned that the extension of the MCO could result in small businesses being closed and low-wage earners losing their jobs and sources of income.

“The recovery will also be taking a lot of time, money and efforts, we have to be vigilant so that we do not have to suffer for a long time,” analyst Dr Aimi Zulhazmi Abdul Rashid told The Malaysian Reserve (TMR).

Aimi Zulhazmi said workers who are already on unpaid leaves may face retrenchment as employers struggle to ensure their businesses stay afloat.

“We have seen how this has impacted China where factories were closed and even the services industry, like the financial sector, was paralysed. Stricter movement also affected the logistics and transportation sector, hence, goods cannot be delivered on time,” he added.

The stay-home order, he said, matters to ensure that Malaysia does not replicate similar trajectory of cases as in Italy and Spain.

“We have seen a rapid rise in the number of victims around the world, especially in Italy and Spain, where exponential Covid-19 growth were experienced. We certainly would not want to replicate (that).

“Our economic growth may suffer during this MCO period, but life matters more than anything else. We may have to sacrifice this short period so that we will rebound higher when things are resolved, hopefully soon,” he added.

Meanwhile, OCBC Bank (M) Bhd economist Wellian Wiranto said if the two-week period of MCO is extended, ramifications on economic growth can be expected.

“Our current baseline scenario is for the MCO to be effective in flattening the curve of the viral transmission, such that economic activities can start to resume soon after.

“With this thinking, we are still keeping to our baseline full-year growth forecast of 3.7%, assuming that any output lost during the last two weeks of the first quarter (1Q) can be largely made up in 2Q and thereafter,” he told TMR.

However, if for lack of compliance and such that the order is extended possibly well into April, OCBC Bank would have to look at the figure again.

Wiranto said enacting such an expansive measure to counter viral transmission is not an easy decision, and the authorities would have hoped for a better compliance of it.

“This is partly because the longer such measures drag on, the more damage it would deal to the economy, to everyone’s detriments. Hope we do not have to come to that,” he added.

Putra Business School associate Prof Dr Ahmed Razman Abdul Latiff reiterates that it is very important to stay home during this two-week period to allow the government to contain the second wave of the virus outbreak.

He said if this containment fails (number of positive cases keep increasing for the next two weeks), the government will have no choice, but to impose a total lockdown throughout the country.

“If a total lockdown is imposed, this will further restrict people movement and businesses will be affected more as they had to remain out of business for a longer period of time.

“This will affect their liquidity as they still have to incur some of the operating expenses such as salary and debt payment,” he told TMR.

Eventually, he said, some of them can go bankrupt and the repercussion will be multiplied as people will be out of job and defaulted on their bank payment.

Financial institutions will then face crisis of non-performing loan and this will affect their ability to finance the business. All this will cause economic slowdown and a potential recession, Ahmed Razman added.