Malaysia may suffer wider deficit if MCO re-imposed – Academicians


Malaysia may suffer a wider deficit should another Movement Control Order (MCO) be imposed in the country, says an economic analyst.

Academy of Science Malaysia fellow, Dr Madeline Berma said the situation could also likely pressure the government to borrow more money to finance and stimulate the economy.

The Finance Ministry has stated that the country’s budget deficit this year is projected to rise to 5.8-6.0 per cent. Prior to this, the 2020 Budget had projected a deficit of 3.4 per cent.

“When there is MCO being imposed again, many small and medium and enterprises will have to wind down, and we will see unemployment rate increasing further including poverty rate and the debt-to-gross domestic product (GDP) ratio, causing inequality to further widen in the country.

“Therefore, we cannot afford to have a second wave of the COVID-19 as not only would it cost the country to lose billions of ringgit a day but would also push the economy to fall further into the domino effect, and risking people to lose jobs as well or taking pay cuts,” she told Bernama. 

According to the Statistics Department of Malaysia (DoSM) 2020 data, the incidence of absolute poverty decreased from 7.6 per cent in 2016 to 5.6 per cent in 2019, but the incidence of relative poverty increased from 15.9 per cent (2016) to 16.9 per cent (2019). 

The department also found that the unemployment rate rose to 5.3 per cent in May 2020, from 5.0 per cent in April 2020, with the number of unemployed persons increasing by 47,300 to 826,100. However, the monthly change on unemployed person data in May 2020 was much lower than the change registered from March to April, at 168,300 people.

Berma was also concerned about the data which showed that 42.5 per cent of companies required more than six months to recover.

Hence, she said another lockdown may result in an emergence of ‘new poor’, that is, the vulnerable poor, labouring poor, and self-employed poor including micro-enterprise operators. 

“In addition, the loan moratorium that is ending in September this year would add more weight of burden and challenges for many companies as they may run out of cash liquidity, requiring them to borrow more or need other stimulus packages to sustain,” she said. 

Meanwhile, Universiti Utara Malaysia’s School of Economics, Finance and Banking dean, Prof Dr Russayani Ismail opined that the MCO if re-imposed would negatively impact the wellbeing and mental health of the society as various studies had shown. 

She cited the adverse effects like anxiety and a sense of loss from being cooped up in the house. 

“It is important therefore for the people to abide by the standard operating procedures (SOPs) and take all the preventive measures,” she said. 

DoSM expects the Recovery MCO which took effect on June 10 onwards, to retain employment, create new jobs and spur hiring as business sectors were now allowed to operate albeit with SOPs. 

In this regard, the worst-hit sector, tourism, is expected to recover sooner rather than later.

Tourism, Arts and Culture Minister Datuk Seri Nancy Shukri recently said the recovery was prompted by the high level of compliance with the prescribed SOPs.

She noted that the average occupancy rate of hotels nationwide, supported by domestic travel was at 21 to 30 per cent. 

Previously, she said the country’s tourism sector was estimated to suffer losses amounting to RM45 billion this year because of the border closures. 

In February 2020, the government unveiled a RM295 billion stimulus package, namely the RM260 billion Prihatin Rakyat Economic Stimulus Package (PRIHATIN) and RM35 billion National Economic Recovery Plan (PENJANA) to boost economic activities and recovery.