‘CMCO a boon only if SOPs strictly adhered to’
The conditional movement control order (CMCO) declared by Prime Minister Tan Sri Muhyiddin Yassin effective May 4 to May 12, 2020 will be beneficiary for economic recovery, but analysts caution that this will only be possible if all standard operating procedures (SOPs) were followed to the letter.
As we pass the 100th-day mark since the first reported Covid-19 case in Malaysia, the CMCO signifies a relaxation of restrictions under the earlier version of MCO, whereby all economic activities, excluding those listed under the List of Prohibited Activities stipulated by the National Security Council, are now allowed to reopen, but subject to enforcement of stringent health SOPs.
“Domestically, the relaxation of movement restriction allows businesses to resume economic activities, generate revenue and consequently reduce layoffs of workers,” said analysts with Kenanga Investment Bank Bhd (Kenanga Research) yesterday.
“In turn, with greater stability of future income flow, consumers would be able to spend, hence supporting growth of private consumption.
“Nonetheless, we forecast overall private sector expenditure growth to slow sharply to 0.6 per cent this year from 6.2 per cent in 2019 – below Bank Negara Malaysia’s forecast of 1.1 per cent.
“We maintain our view that private consumption would remain weak in spite of the CMCO as wages and income levels could have fallen sharply.”
To recap, Malaysia recorded its first three Covid-19 cases on January 26, 2020. To date, there total as of time of writing yesterday is 6,298 active cases with 105 deaths, bringing the mortality rate to 1.67 per cent which is relatively low compared to roughly seven per cent globally.
Although the MCO has helped to flatten the curve by reducing the spread of the Covid-19 pandemic for the past few weeks, Kenanga Research said the implementation of a nationwide CMCO could be risky as the majority of positive Covid-19 cases is concentrated in Selangor and Kuala Lumpur.
“Based on Malaysia’s Covid19 pandemic trend, with an assumption of 50 per cent CMCO compliance rate and poor SOP implementation, our model shows a high probability of higher infection rate in coming days, accumulating a total of at least 8,000 cases by the third week of the CMCO,” it forewarned.
“Complacency and the false notion that the pandemic is fully under control, though infection rate is still relatively high, would be the biggest folly.
“Such is the debate that is going on in the US and EU where politicians are championing reopening despite being advised by experts to patiently wait till rate of infection slows and under control.”
As of May 2, the states with zero Covid-19 active cases are Perak, Kelantan, Kedah and Perlis . Out of 157 districts, there are 10 red zones in total, with Kuala Lumpur registering the largest number of active cases (25.4 per cent).
Several states have decided not to implement the CMCO, including Sarawak, Sabah, Kedah, Selangor, Negeri Sembilan, and Pahang.
“It is important to note that any improvement to the economy and well-being of the people following the CMCO would materialise in a much gradual manner and is heavily contingent upon the development of new cases in the coming days,” Kenanga Research reiterated.
“If there is a renewed spike in infections, consumer and business sentiments would suffer further downturn, as such resulting in a reversal towards cautious spending and investment habit.
“While this move helps to lift up the economy and rebuild consumers’ confidence, it may lead to another wave of even more widespread infections, if people fail to strictly adhere to the social distancing measures.
“Should this occur, the government must be swift in imposing an enhanced MCO, specifically for the affected areas.”
Domestically, the relaxation of movement restriction allows businesses to resume economic activities, generate revenue and consequently reduce layoffs of workers. Kenanga Research