New measures, not lockdowns, vital to aid economic recovery


LOCKDOWNS are no longer tenable to contain the virus as the country is in recession, experts said.

As the government urges Malaysians to come to terms with living in the endemic phase, experts call for all levels of society to embrace the new normal, including embracing the hybrid work mode and limiting physical interactions.

Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the latest GDP figures — lower than previously anticipated — suggest that the economy is extremely vulnerable to restriction on human mobility and this is closely linked to the Covid-19 breakout which led to the reimposition of the Movement Control Order (MCO) 3.0 in late June this year.

“Embracing the new way of working arrangement such as work from home shall be encouraged especially for functions that can operate effectively and efficiently in this environment. This is to ensure physical interaction can be kept minimal in order to reduce the risks of transmission,” Mohd Afzanizam told The Malaysian Reserve (TMR).

Malaysia’s GDP in the third quarter of 2021 (3Q21) contracted by 4.5% year-on-year (YoY), lower than Bloomberg’s poll of -1.9% and Reuters’ -1.3%.

Mohd Afzanizam said it is “extremely critical” to ensure that new measures are introduced to contain the virus or it would be inevitable for Malaysia to return to MCO.

“Perhaps next year’s (GDP figures) should be within the government’s target range of 5.5% to 6.5% barring any unforeseeable circumstances, namely Covid-19-related risks,” he added.

Malaysian University of Science and Technology’s Institute of Postgraduate Studies dean Dr Geoffrey Williams said the economic decline is purely due to the lockdown.

“We are in recession actually because the two consecutive contractions of the GDP by 1.9% in 2Q21 and now 3.6% in 3Q21 are a technical recession. This is purely the result of the lockdown policy,” he told TMR.

He also believes the decline in GDP by 3.6% quarter-on-quarter (QoQ) and 4.5% YoY is due to a decline in inventories, which fell 4.1% QoQ compared to 2Q21 when inventories had increased 4.2% QoQ.

“The inventory effect had actually pushed up GDP in 2Q21 and made the figures look like a sharp rebound, whereas underlying activity was still very sluggish and we are seeing this effect now in 3Q21,” said Williams.

Centre for Market Education CEO Dr Carmelo Ferlito forecasts Malaysia’s full-year GDP to be around 2%.

“I think we should be more interested in the GDP composition and the growth of the different components. For example, a big growth mainly driven by government expenditures financed with debt or money printing is not good.

“For 2022, it is too early to say and too many uncertainties ahead — pandemic, new lockdowns, international borders, immigration rules for foreign workers and tax evolution,” he told TMR.

Meanwhile, UOB Kay Hian Wealth Advisor head of investment and financial planning Mohd Sedek Jantan expects GDP for 2021 will be 4% supported by travel bubbles (Malaysia-Singapore quarantine-free by end of this month), reopening of all the sectors of the economy, higher commodities prices and export demand.

“I foresee GDP for 2022 at 5.5% will be supported by the international border reopening and this will encourage more economic activities. Foreign direct investment will continue to recover.

“Unemployment rate continues to reduce target at 3.8% but to reach the pre-pandemic level a little bit impossible, unless the government provides incentive to employers,” he told TMR.

However, HELP University economist Dr Paolo Casadio expressed worries that even with a rebound expected for 4Q21, the whole year will close with an average growth around 2.8%, which is very disappointing following the contraction of 5.6% in 2020.

“Instead of a powerful rebound in 2021 to recover the earlier contraction, the Malaysian economy will only claw-back about half of what was lost during the previous recession in 2020.

“For 2022, I expect overall growth of only 2.5% over the year and GDP will only return to the level of GDP we had in 4Q19 in the second part of 2023. That means two and a half years of growth wiped-out because of the lockdowns,” he told TMR.