‘MCO 2.0, emergency will not derail Malaysia’s 2021 rebound’
KUALA LUMPUR: Researchers with AmBank Bhd (AmBank Research) opine that the second movement control order (MCO 2.0) and state of emergency (SOE) declaredon January 11 and 12 respectively will not likely delay Malaysia’s economic recovery this year.
“While some dent could be expected on the immediate term, it is unlikely for the economy to report an extremely slower growth in 2021,” it said in a special report on the ma er.
“Looking at the MCO 2.0 this time around, it appears to be less restrictive. Key sectors like manufacturing, industrial, construction, services, distribution and trade, plantation and commodities are allowed to operate.
“These sectors play a key role to support the supply of basic necessities, ensure uninterrupted supply chains and support critical infrastructure and emergency work.”
The potential easing on the list of economic sectors allowed to operate during the restrictive movement period remains on the table, AmBank Research added.
“Room for several key manufacturing sectors which are not under the essential services list as part of the economic sectors — textile and apparel manufacturers, ceramic product manufacturers, glass and footwear manufacturers as they are mainly export-oriented industries –– could be included.
“Likewise, some of micro businesses that have already been adhering to the SOP could be allowed to operate.”
Given that the MCO 2.0 and state of emergency’s aim is to control the pandemic virus spread while the economy operates as usual, AmBank Research said the downside risk on the overall economy could be less severe than envisaged.
“Besides, from our past experience with the MCO, there would be a more well-defined standard operating procedures (SOPs), logistics and work-from-home infrastructure. There will be less disruption to businesses,” it continued. “And the public will be be er prepared with heightened awareness.
“Combined with the RM325 billion stimulus measures which are expected to be implemented faster and effectively, steady export growth from improving global GDP and trade, and firmer commodity prices with an upwards revision of 2021 are anticipated.”
The view that the pandemic virus spread dust will se le in six to 12 months should see the domestic economy on the whole hold up well, AmBank Research added.
However, it said it was important to recognise that there would be some initial setback from the restrictive measures which is more likely to be felt in 1H2021.
“Assuming the overall economic capacity during this period operates around 50 to 60 per cent in the first quarter (1Q) of 2021 and improves to 70 to 80 per cent in 2Q with a gradual easing of the restrictive measures, and the economy operates as usual in the second half, the reduction in domestic Gross Domestic Product (GDP) would be between 0.6 and 1.3 per cent,” it estimated.
“This would mean the 2021 GDP projection of 6.5 per cent growth would now be hovering around 5.2 and 5.9 per cent. Upside to growth still remains, depends on external and domestic.”