KUALA LUMPUR – The government must roll out stimulus packages immediately to help the people through the movement control order (MCO).
Economist Datuk John Antony Xavier told The Vibes that the lockdown in seven states – the latest being Kelantan – as well as tightened movement curbs elsewhere have dealt a blow to businesses and will result in higher unemployment.
“The government must give wage subsidies for employers to keep their workers employed. There must also be a moratorium on servicing debts. Extra support must be given to the travel and tourism, and hospitality industries.”
The professor at Universiti Putra Malaysia’s Business School said companies’ cash flow will be affected, and a moratorium on debt servicing will help relieve the tight capital expenditure position.
“However, this time, the lockdown won’t be so hard on the economy as the first round in March last year, as the economy has grown less sensitive to the lockdown and businesses have learnt to adapt.”
The economy has grown resilient, he said, and some sectors that remain open for business will cushion the shock of the MCO.
“The sectors include manufacturing and construction, which will partly buffer the effects of the MCO. This means that the government will have less to pay by way of stimulus compared to before.”
In its research note to investors, Affin Hwang Capital said Putrajaya may announce further stimulus measures to mitigate the negative impact of the MCO.
The financial services firm said the current two-week lockdown could result in economic losses of RM800 million to RM1 billion a day, less than the hit of RM2 billion daily when the MCO was imposed last year.
As a result, the country’s real gross domestic product growth will likely be dragged about 0.8 percentage point this time around.
“We will revisit our forecast, where it will be likely revised downwards, subject to the duration of the current MCO, as well as the fiscal stimulus response by the government in view of the uncertainty surrounding the resurgence of domestic Covid-19 cases.”
It has kept its 2021 GDP growth forecast of 6%, compared with the -5% estimated last year, as well as a “neutral” call on Bursa Malaysia’s benchmark FBM KLCI, with a year-end target of 1,730 points.
Affin Hwang also expects domestic demand to recover, and despite a challenging backdrop in 2020, it said Malaysia continues to attract foreign direct investment (FDIs).
In the first nine months of 2020, approved FDIs remained positive, amounting to RM43 billion from the RM65.4 billion registered the previous year.
“We believe that as soon as the political development stabilises, the upward trend in private investment growth will recover, especially when business sentiment improves in a relatively low-interest-rate environment,” said the firm. – The Vibes, January 15, 2021
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