THE loosening of conditional movement control order (CMCO) restrictions has triggered a wave of interstate travel but the gloomy economic outlook is still expected to last into the first quarter of next year.

Market observers and leaders of small and medium enterprises (SME) groups do not expect a rebound as there is still uncertainty surrounding the Covid-19 pandemic and the national caseload could fluctuate until a sufficient proportion of the population is vaccinated.

Unless the government gets a firm grip on the pandemic, any positive effect from the loosening of travel restrictions will be minimal, as consumers are generally still wary.

Associated Chinese Chambers of Commerce and Industry of Malaysia SME committee chairman Koong Ling Long said growth in the fourth quarter this year will be lower than in the third quarter, and the slow recovery is expected to persist into next year.

“There won’t be much improvement in the market next year. Growth in the fourth quarter will be worse than the third quarter due to the CMCO. Everyone is also mentally exhausted.

“The loosening of restrictions definitely has a positive effect, but it won’t be as good as the third quarter,” Koong said, referring to the recovery MCO period that was cut short when the CMCO was reintroduced on most states.

In anticipation of sluggish economic performance next year, the government should bring the Covid-19 pandemic under control starting now, he added.

“If the situation remains unstable, such as having another major outbreak like that in Klang, then the economy will be affected,” Koong said.

The public also needs to co-operate with the authorities or they will also be responsible for the constantly fluctuating situation.

“These fluctuations won’t help the economy recover. It was encouraging a few months back, but Covid-19 is still unstable and there are other uncertainties. There are also many countries in Europe going back into lockdown again.”

The relaxations under the present CMCO include interstate travel, dining out with up to four people at a table and travelling in a vehicle according to its maximum passenger capacity.

The tourism and cultural sectors in CMCO areas are also allowed to reopen, which include meetings, incentive travel, conferences and exhibitions, and theme parks, but only at 50% capacity to allow social distancing.

Koong said these relaxations will bring relief to SMEs and help review tourism, retail, and the food and beverage sectors.

However, despite this, the ongoing spike in cases, especially in the Klang Valley, is not encouraging for consumers.

While consumption from July to September had picked up after harsher restrictions were imposed from May to June, the reintroduction of CMCO in October and increase in infections have made consumers wary.

“Consumers may go out but they are mentally shaped now to be more cautious, which in turn affects consumption.

“For example, as an estimate, the regular consumer may be spending RM100 less than before when going out due to the current circumstances,” Koong said.

The fact that most of the infections are occurring in factory-related clusters and involve migrant workers still raises caution among consumers.

Moreover, that many clusters are factory and construction site-related will also have a negative impact on companies, resulting in supply chain and cash flow disruptions, Koong added.

SME Association of Malaysia president Michael Kang said the government must closely monitor and tighten enforcement on high-risk areas and groups.

“The public must also not tempt fate and keep following the Covid-19 standard operating procedures (SOP), lest the government bring down the hammer when another major outbreak occurs,” he said.

Kang predicts better recovery from the second half of next year, after the Covid-19 vaccine is rolled out to the population from the first quarter.

Down south, Johor South SME Association adviser Tek Kee Sin said the continued border closure between Malaysia and Singapore will not help the economy there.

With Covid-19 under control in Singapore, Johor businesses are hoping that Singapore tourists will be allowed to cross the Causeway again.

In the meantime, local SMEs have adapted by expanding sales online targeting Singaporean buyers and are focusing more on exporting products instead of domestic retail.

“I think economic recovery is more likely from March, everyone is hoping and waiting for the vaccine,” Tek said. – December 20, 2020.