‘MCO 3.0 to cost RM300 million per day to the economy’
Analysts at Public Investment Bank Bhd (PublicInvest Research) warn of high economic costs as the government reimposed a nationwide Movement Control Order (MCO 3.0) again, just two months a er exiting the previous one (MCO 2.0).
Analysts at Public Investment Bank Bhd (PublicInvest Research) warn of high economic costs as the government re-imposed a nationwide Movement Control Order (MCO 3.0) again, just two months after exiting the previous one (MCO 2.0).
MCO 3.0 is scheduled to run from May 12 to June 7.
Citing a potential national disaster in the making should this move not be undertaken, Prime Minister Tan Sri Muhyiddin Yassin highlighted in his speech that more drastic measures has had to be taken in light of the emergence of new variants and higher infectivity rates amid the Rakyat’s failure to strictly comply with standard operating procedures (SOPs).
“As a result, we are now faced with the ‘third wave’ and the national health system breaking at its seams. The pace of increase in daily cases this time round is scarily more rapid than before,” PublicInvest Research said.
“MCO 1.0 is estimated to have cost the economy RM2 billion per day, with MCO 2.0 at RM300 million per day. Given the similarities, MCO 3.0 could also see a daily hit of about RM300 million to the economy, particularly from restrictions on contact-sensitive businesses which will be a drag on the services sector,” it forewarned.
“We had always cautioned that the pandemic could still trip up enthusiasm in the market. Market sentiment had improved late last year with the first rollouts of the much-awaited Covid-19 vaccine.
“That excitement appears to be floundering however, amid a global resurgence in Covid19 cases and the relatively labored pace of vaccinations domestically.”
While vaccinations are expected to gather pace in the coming months, the discouragingly low levels of registrations are a cause for concern and may be a dampener toward the government’s aim in achieving herd immunity by end-2021/early-2022.
PublicInvest Research underscored the importance for this programme to be sped up if the country’s economic recovery is to have a fighting chance of hitting the upper band of consensus expectations.
“What will happen now? There will not be any fear or panic, especially since most economic sectors will continue to remain open,” it continued. “The startstop nature of these recovery measures do not bode well for sentiment however, and may prove to be a drag on the GDPdominant services sector.
“We are concerned that the improvement in labor market conditions may be delayed
by the constant MCOs and resultant strains on businesses, while the government may also find it hard-pressed to continue supporting households and business without putting further strains on its coffers should these conditions persist.”
It went on to highlight the ‘obvious sectors” being hit will being tourism-related ones (hotels and airlines) given the prohibition of cross-border travel.
“Gaming (casinoes) may be deemed non-essential and a potential hotspot, and may be shuttered once again, though the impact to earnings is not likely to be significant as cross-border and international travel have not been allowed or some time in any case,” it added.
“The consumer sector may not be as badly affected however as most sub-segments are open, although the notable drop in expected mall footfall could crimp sales.”
Longer-term cyclical recovery plays like banking, oil and gas, and construction look to be back on track, with the recent MCO 2.0 and the declaration of Emergency doing little to dim respective prospects, PublicInvest Research said.
“Impact from the current MCO 3.0 is not likely to be dire as well, though we are wary over its effects on sentiment. We see no changes to fundamentals of the recovery story for now.”