The pandemic has devastated lives, pauperised many in the country and looted trillions from global economies
pic by BLOOMBERG
MALAYSIA’S economy escaped the dreaded contraction in the January through March period. But there were no fireworks, high fives and fist bumps that came with the first quarter of 2020 (1Q20) GDP announcement.
Economic activities had slowed to a snail’s pace. Growth felt like a donkey pulling a 20ft container. The 0.7% GDP growth was the steepest quarterly drop in more than a decade after a 4.5% rise in the same quarter a year ago.
Distributive trade, consumption, industrial production and export, which rose especially during the first two months of the year, prevented the country’s economy from backsliding into negative territory.
But analysts warned of a severe contraction for the current quarter as the economy is in a partial lockdown for almost two-thirds of the quarter. The economy is all but certain to be in the red for the April-June period.
The first phase of the Movement Control Order (MCO), which started on March 18, had destroyed consumer demand and the tourism sector. The additional extensions and the deteriorating global economy were the final nails to the coffin.
The cold and eerie feel of death to the economy was felt earlier. Things started to go south after Wuhan closed its borders and the coronavirus infections spiked in South Korea, Japan and other regional economies before spreading to Europe right after the Chinese New Year celebration.
Tourism was steadily dying. Booking cancellations were mounting. Carriers were seeing a drop in passengers. People were already living in fear. Retailers were already seeing a drop in sales.
In less than two months, Covid- 19 had the world on a tight noose. Malaysia’s first Covid-19 detection was in late January before the health concern turned into a crisis and the country’s 32 million people forced to stay home, manufacturing and economic activities tanked, and outsiders barred from entering its borders.
The coronavirus pandemic has hammered the country’s economy, destroyed demands, added a few hundred thousands onto the jobless market and added three million people into the already bloated list of the national “bantuan” list.
The prognosis is bad for the next two quarters before some normality is expected to return in the final quarter of the year. But that comes with a caveat — as long as there is no Covid-19 second wave. Another prolonged MCO after June will certainly kill the economy for the year.
Interestingly, the central bank has been “polite” with its word selection, calling the 1Q20 steepest slowdown as a “moderation” due to the measures taken to contain the Covid-19 pandemic.
The figures revealed that the agriculture sector contracted -8.7%, mining dropped 2% and construction slipped 7.9%.
Bank Negara Malaysia (BNM) governor Datuk Nor Shamsiah Mohd Yunus expected a recovery in the second half of the year, but painted a grim 2Q20 outlook.
“Given the containment measures in Malaysia and globally, we have to expect that the Malaysian economy will experience a sharp contraction in 2Q20 compared to 1Q20,” Nor Shamsiah was reported as saying.
The central bank does not have a figure on how steep the fall will be, but a -4% to -6% contraction is likely on the card despite the over RM250 billion stimulus package.
What takes the wind out of the sails was the statement that Malaysia was well positioned to benefit from the global recovery, fuelled by strong logistics players and online shopping.
“We already witnessed the rise in employment in retail delivery services. Ride-hailing companies also grow with online deliveries for local food and beverage businesses. This has helped micro and small enterprises to sustain through the MCO,” she was quoted as saying.
Certainly, we are not hoping that ride-hailing and home shopping will fill the gap left by the battered oil and gas revenues, or delivery services were meant for the hundreds of thousands sacked from their jobs when their specialties are culinary and creating five-star dishes, running spreadsheets and figuring out baseline profit, and rendering engineering drawings of oil platforms, medical equipment or MRI (magnetic resonance imaging).
Having the highest number of ride-hailing riders may be a stop-gap measure. In fact, it is a noble way to earn a living. But it would not put the country into the elite of nations.
The government is expected to release a comprehensive package to revive the economy before the end of the month. The pandemic has devastated lives, pauperised many in the country and looted trillions from global economies.
Putrajaya must get it right. It must be all but forward-looking, bold enough to invest in research and development, especially in biomedicine and medical research.
There must be the will power to abandon the “old Viagra” of economic growth like construction and structure building, and a shift towards innovations, product creations, 3D manufacturing and customisation.
HG Wells wrote: “It sounds plausible enough tonight, but wait until tomorrow. Wait for the common sense of the morning.”
Certainly, ride-hailing sounded plausible yesterday, but it will not be one tomorrow.
For now, the best known Aidilfitri songs fail to lift the spirit during the season and it feels like the coming of a long cold winter.
Mohamad Azlan Jaafar is the editor-in-chief of The Malaysian Reserve.