TWO million Malaysians out of work and an almost complete shuttering of businesses are among the impacts of a second national lockdown, said experts, as Putrajaya warned of such a measure due to surging cases of Covid-19.

The economic damage will be far more severe, as a second movement-control order (MCO) will deliver the death blow to businesses that were crippled in the first lockdown and are now struggling to get back on their feet, economists told The Malaysian Insight.

A second lockdown will also delay economic recovery by up to a year, from the predicted first half of 2021 to 2022.

The experts said Putrajaya must, as much as possible, avoid enforcing another nationwide lockdown. Instead, it should keep containment efforts localised via the enhanced movement-control order (EMCO) in areas of outbreak.

“The impact of the first lockdown was serious enough, and we have not yet felt its full impact,” said Dr Shankaran Nambiar, a senior search fellow at the Malaysian Institute of Economic Research.

He said the damage from a second lockdown would be unimaginable.

“We will see the fallout from the first lockdown as the months go by because companies have to face reduced demand with no reduction in operating costs, while having to service their loans at the same time.”

He was referring to the end of the moratorium on loan repayments in September, which means borrowers will have to resume paying back financial institutions in October.

Trade associations are already predicting more bankruptcies and layoffs after October, as companies are forced to choose between retaining staff or settling their loans with a decreased income.

“On the side of consumers, with increasing unemployment, pre-existing debt and lower consumer confidence, the outlook is not pretty,” said Nambiar.

“The government will not want to impose a second lockdown, but should it be forced to do so, it will have to contain the resultant economic impact within its limited fiscal and monetary space.

“Unemployment could go up to 1.5 million to two million.”

EMCO less painful option

The country went into partial lockdown from March 18 to May 12, which was followed by the conditional movement-control order that ended on June 2.

The MCO shut down most of the economy save for a handful of essential industries, such as food, healthcare, energy and logistics.

Putrajaya’s Economic Planning Unit said 520,000 jobs were lost during the MCO period, incurring losses of RM63 billion.

As the country recorded new coronavirus cases in the double digits over the last few days, Prime Minister Muhyiddin Yassin warned that a second lockdown could be enforced to contain a second wave of outbreaks.

Socio-Economic Research Centre director Lee Heng Guie said the economy, already hanging by a thread, will be unable to withstand the blow of another MCO.

“Uncertainty and fear of another lockdown will negatively influence consumer spending and business decisions, causing a protracted, deeper economic downturn.

“(A second MCO) will push back recovery. It is estimated that the economy bled RM2 billion for every MCO day.”

Lee said a second MCO will do lasting damage as businesses go from struggling to bust and more jobs are lost.

“In particular, the hospitality and tourism sectors, which are showing some green shoots on a gradual revival in domestic inbound tourists, will suffer a deep setback.”

Dr Yeah Kim Leng of Sunway University said a second MCO will add to the government’s debt burden as it will have to borrow more to help jobless Malaysians and battered businesses.

The RM45 billion in direct government aid given out under the Prihatin and Penjana packages has caused the national deficit to increase to 5.8% to 6% of gross domestic product.

Another aid package to rescue the economy may cause the deficit to increase by another 3% to 4% as it will take more money to fix the pain caused by a second MCO, said Yeah.

A second 14-day MCO will push the expected 2021 recovery to the second half of the year or the first half of 2022.

“This is something that we must, as much as possible, avoid. It would be better for the government to impose EMCOs in targeted areas when infections are detected,” said Yeah.

“If one area is locked down, the effect is not as bad as shutting down the whole country, as everyone outside that area can continue working and businesses can continue to operate. This is the better option.”

Malaysia yesterday saw 21 new Covid-19 cases, bringing overall infections to 8,861. Of the total, 161 are active cases. The death toll is 123. – July 25, 2020.