Lockdown is necessary, expect another round of stimulus – Economists

by BERNAMA / pic by TMR FILE 

KUALA LUMPUR – Economists opine that the total lockdown announced by Prime Minister Tan Sri Muhyiddin Yassin which would take effect from June 1 till 14 is a measure that makes sense to cope with the soaring number of COVID-19 cases.

In this respect, they said another round of economic stimulus is highly likely to happen but to be targeted and time bound.

“Given the higher number of new cases and how it may impact our healthcare capacity, there is urgent need to break the chain of infection as soon as possible,” Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid told Bernama.

In light of further restrictions in economic activities as well as uncertainties over the duration of the full lockdown period, he said the economic recovery is expected to be timid.

However, the improvement in global demand undoubtedly would continue to support the main economic sectors such as manufacturing, while for the services industries, he said it was anticipated to be very restrictive.

“Since the services sector accounted more than 50 per cent of the economy, Malaysia’s Gross Domestic Product (GDP) may not grow at a rapid pace given the strict standard operating procedures (SOPs) and limited human mobility,” he said.

Putra Business School Associate Professor Ahmed Razman Abdul Latiff said there will be immediate concern on the negative impact to individuals and traders as what happened during MCO 1.0.

“Since this full lockdown MCO will continue in phases which most likely will last around six weeks, it will bring negative impact to the economy just like the second quarter of 2020 where we experienced a GDP contraction of -17.1 per cent.

“The same thing will happen especially for the second quarter growth this year. Therefore, the government must come up with another fiscal relief plan to help the affected groups,” he said.

Meanwhile, Juwai IQI Global chief economist Shan Saeed said: “It’s a tough call for Muhyiddin to make with rising cases.”

Obviously the economy takes the pressure in the short run but once the lockdown is over, momentum can build up again at the macro level, he stressed.

“It’s a trade-off between epidemiology and economics. All stakeholders need to work closely to fight the COVID-19 new wave.

“Getting vaccinated is the only solution to get the economy back to pre-COVID levels,” he said.