PUTRAJAYA should focus on lowering the Covid-19 infection rate rather than looking at the number of daily cases with the reimplementation of the two-week movement-control order, said economists.

The new MCO would undoubtedly affect Malaysia’s economic resilience, they said, pointing to the impact on the recovery from the first MCO last March.

They told The Malaysian Insight that it is still unknown if the six states under MCO again can rebound like they did from the middle of last year.

Selangor, Penang, Malacca, Johor, Sabah, and the Federal Territories of Kuala Lumpur, Putrajaya, Labuan are currently under MCO, while Pahang, Perak, Negri Sembilan, Terengganu, Kedah and Kelantan are under the conditional MCO. Only Sarawak and Perlis remain under recovery MCO.

Prime Minister Muhyiddin Yassin also declared an emergency until August 1, as a measure to combat the pandemic.

Universiti Tunku Abdul Rahman economics associate professor Wong Chin Yoong said last year’s MCO was implemented when daily case numbers were still in the triple digits and it took about two months for the numbers to go back down to two digits.

If the second round of MCO is lifted when daily case numbers fall back to two digits, recovery may take a long time, said Wong.

As such, he hopes the government will focus on bringing down the infection rate rather than looking at the daily numbers as a long lockdown will be harsh.

“We hope the R-naught rate can be brought below 1, and then the conditional MCO can be put in place after that.”

A long lockdown will cause great economic harm but the risk of a resurgence of the virus will still be present, he said.

Last year’s MCO only managed to “flatten the curve” but the second and third wave of infections followed soon after

“This MCO won’t be the last, there may even be a MCO 3.0, unless the vaccination goes according to plan.

“And every time the MCO is implemented, the economy suffers. The economy has not even fully recovered and it is affected again,” Wong said.

Malaysians should also brace for more MCOs, he said.

“Don’t be too single-minded when tackling the Covid-19 issue. We need to find a balance between fighting Covid-19 and safeguarding the economy.”

Wong said MCO 2.0 will also disproportionately affect small and medium businesses, increasing inequality in the country.

For example, he said, big businesses with cash on hand would’ve already adapted their business model to the current situation, but smaller businesses would struggle to do so and MCO 2.0 will only worsen their situation.

Most Malaysian workers, Wong said, are employed by SMEs and MCO 2.0 may worsen recovery in these sectors.

The government should roll out economic policies to cushion the impact on small businesses when the MCO is implemented, he said.

Healthcare breakdown

Phillip Capital chief strategist Phua Lee Kerk meanwhile said that while the healthcare system is near its breaking point, the economy, too, is near collapsing.

Phua, however, said most investors have already taken into account the possibility of a second MCO before it was announced and the disruption will be minimal.

“Will it be as bad as last year? Maybe it will drop a little, but the remaining outlook will be better. It will probably improve after a week or two, so the disruption won’t be too big,” he said.

However, Phua said the biggest threat to the economy right now is the breakdown of the healthcare system, which would be disastrous.

“If the healthcare system holds, then it shouldn’t be a huge issue.

“Last year, nobody knew how to respond to the pandemic, so the disruption was great. Now, businesses and restaurants have a better handle on things.” – January 16, 2021.