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Government takes measured approach on COVID-19 outbreak: Analyst

KUALA LUMPUR, 18 March 2020 – The government is taking a measured approach based on the severity of the Covid-19 outbreak in the country with the imposition of a nationwide movement restriction order announced on Monday night, says an analyst.

Institute for Democracy and Economic Affairs (IDEAS) research manager Lau Zheng Zhou said the government has escalated the steps when the situation worsens or calls for it so that the disruption to the economy can be better managed.

“The measures are clearly consumption-driven as it targets the more vulnerable segments of society such as those already identified as Bantuan Sara Hidup (Cost of Living Aid) recipients, the tourism sector, and employees who will be faced with a sudden disruption to their income generation,” he told Bernama in an email interview today.

Lau said supply shock has been causing disruption to factories’ production, creating a ripple effect on suppliers, buyers, employees and others while the tourism sector has also been hurt and may cause a similar multiplier effect on the hospitality, food and beverage industry and even e-hailing services.

Prime Minister Tan Sri Muhyiddin Yassin announced a nationwide movement control order from March 18 to 31, 2020 due to the COVID-19 outbreak.

The order, the first in the country’s history, was made under the Prevention and Control of Infectious Diseases Act 1988 and the Police Act 1967. It entails a comprehensive restriction on movements and public gatherings throughout the country, including religious, sports, social and cultural activities.

The prime minister said the order also involves a comprehensive restriction on all Malaysians travelling abroad. Those who have just returned from overseas are required to undergo a health check and to self-quarantine for 14 days.

Lau pointed out that the government would have to monitor the pandemic situation and take step-by-step actions rather than provide a massive one-off injection into the economy.

“Other measures could be undertaken in the healthcare sector, for example, if the situation worsens and undercapacity becomes an issue. But this must be done in a way that does not introduce shock to the fiscal health of the government,” he added.

Muhyiddin had also announced additional measures to the existing Economic Stimulus Package following the first meeting by the Economic Action Council.

Among the stimulus measures, the government will allocate about RM120 million for workers who have been forced to take unpaid leave, as well as RM500 million to provide a two per cent discount in monthly electricity bills to industrial, commercial, agriculture and domestic users.

Lau also noted that private consumption makes up nearly 60 per cent of the gross domestic product and has been compensating for the decline in investment.

“These measures should help to cushion the impact. But in the medium to long term, it is likely that growth is going to be based on investment in process efficiency and product innovation as well as enhancing export competitiveness,” he added.

Asked whether COVID-19 would hit the global economy even harder than the 1997 financial crisis, Lau said governments and central bankers globally have been coordinating to stimulate the economy.

“This is very different from asset booms and busts that sometimes take policymakers by surprise. But in any case, COVID-19 introduces supply shock to the economy and dampens global demand further, so the implications could be far more serious,” he added.

In February this year, Bank Negara Malaysia warned that COVID-19 will likely affect domestic growth, particularly in the first quarter of this year, if the situation is not contained.

Meanwhile, the International Air Transport Association (IATA) urged governments to see air cargo as an essential part of the fight against COVID-19.

The association said governments could consider taking several actions such as excluding air cargo operations from any COVID-19-related travel restrictions to ensure life-saving medical products can be transported without disruption, as well as exempting air cargo crew members, who do not interact with the public, from 14-day quarantine requirements.

IATA director-general and chief executive officer Alexandre de Juniac said over 185,000 passenger flights have been cancelled since end-January in response to government travel restrictions.

“With this, vital cargo capacity has disappeared when it is more urgently needed in the fight against COVID-19. The world’s fleet of freighter aircraft has been mobilised to make up for this capacity shortfall.

“Governments must take urgent measures to ensure that vital supply lines remain open, efficient and effective,” he said in a statement on Monday.

First published in BERNAMA, 18 March 2020

2020-03-18T15:43:25+00:00 18th March 2020|News|Comments Off on Government takes measured approach on COVID-19 outbreak: Analyst