IMPOSING a total lockdown to stem the Covid-19 cases will negatively impact the economic sectors with damaging implications to businesses and the country’s economy, said two economists.

They said that many companies would not be able to undertake another closure of business, and this would result in job losses.

They also said that Putrajaya needs to learn lessons from the two previous rounds of movement-control orders (MCO) to come up with a better exit strategy.

Socio-Economic Research executive director Lee Heng Guie said enforcing similar stricter lockdowns would further strangle businesses that have barely recovered.

“There will be an impact on the economy if a restriction order like MCO 1.0 or stricter is imposed.

“Those sectors that are still nursing their wounds from losses will take another notch downwards,” he told The Malaysian Insight.

He said some businesses would be forced to wind up if another strict lockdown is imposed because they do not have the reserves to carry on.

Lee said if the government still decides to impose the complete lockdown, then it must continue to provide financial relief and support to businesses to tide them over during the period.

The government is set to hold a meeting today to discuss the possibility of imposing a full lockdown amid the spike in Covid-19 cases and deaths.

The nation saw a record high of 6,806 daily cases yesterday, taking the national caseload to 492,302. A new record of 59 Covid-19 deaths was also reported, bringing the death toll to 2,099.

Government hospitals are also running out of ICU beds with private hospitals being told to allocate more beds to treat Covid-19 patients.

Better exit strategy needed

Lee also predicted that the economic losses of MCO 3.0 would be slightly higher than the previous MCOs.

He said the Hari Raya celebration, which was celebrated under MCO 3.0, could have impacted the growth.

“When it comes to MCO 3.0, the degree of impact could be slightly higher than MCO 2.0 because the Hari Raya effect will be even more.

“Some will say that there was also MCO during the Chinese New Year but I think in terms of customer base comparing the Chinese to Muslim customers, they have a bigger population and customer base.

“So, there would be some effect,” he said.

Lee said that the government must study the previous lockdowns well and come up with a better exit strategy.

He said hasty decisions has cost the country dearly, in terms of the state of the economy and the number of Covid-19 cases.

“We move from MCO to conditional MCO and recovery MCO. Then when we fail, cases boil up.

“So, we have to think through a better exit strategy. We have to learn from the past on how we can do better so that we don’t fall back to square one,” he said.

Rajah Rasiah, a professor of economics at Universiti Malaya, meanwhile, said that implementing a similar lockdown to MCO 1.0 would impact the economy negatively.

He said the government could have brought Covid-19 cases down if the authorities could ensure that the SOP was not compromised.

“Returning to the MCO 1.0 regime will once again negatively affect the economy, quite considerably, and this will be a further drain on the treasury as the sustenance of worker livelihoods would require further subsidies and interest-free debt moratoriums.

“Hence, while controls were tighter during MCO 1.0, the same impact could have been generated with lighter controls if only the authorities can ensure that the SOP is not compromised,” he said.

Rajah said some factories and workplaces were abusing SOP controls, and this was a reflection of scant coordination between these operatives and the enforcement body.

Yesterday, the Malaysia Retailers Association urged the government not to implement a full lockdown as it will cost irreparable damage to the economy, devastate businesses and stifle recovery efforts.

Although MCO 1.0 was able to slash the number of Covid-19 cases, it had a deep impact on the economy with Prime Minister Muhyiddin Yassin saying it had cost the country an estimated RM2.4 billion daily.

Malaysia’s GDP had been in negative territory since the second quarter of 2020 (Q220), where the economy dipped to -17.2% due to impacts of MCO 1.0, where only essential sectors were allowed to operate during this period.

The country’s full-year economy tanked to -5.6% in 2020 compared to 4.4 in 2019, making it the country’s biggest GDC decline since 1998. In Q121, its GDP contracted by 0.5% despite the government imposing MCO 2.0.

Malaysia, however, did not shut down its economy under the MCO 2.0 and even during the current lockdown.

Under the MCO3.0, there stricter restrictions against inter-district and interstate travel, social activities, as well as on the sports and education sectors have been imposed. – May 21, 2021.