Image credit: New Straits Times
KUALA LUMPUR: A complete economic shutdown, which was implemented in the early part of last year, should be undertaken again only as a last resort in the event the pandemic gets out of control.
Commenting on reports that the government was mulling "a strict lockdown" after Feb 4 when the Movement Control Order (MCO 2.0) ends, economists cited the detrimental effects of such a drastic measure on the economy which is in the recovery phase.
Putra Business School Associate Professor Dr Ahmed Razman Abdul Latiff said such a move should be a "last resort" after other avenues had been exhausted.
"This is due to the negative implication if a strict MCO is imposed. There is no guarantee that many businesses would be able to sustain or maintain their workers even if the MCO is implemented for two weeks as it can be extended in the event the situation does not get better.
"Other options are to deploy more soldiers and police to enforce the SOP (standard operating procedures), and housing only symptomatic patients in government and private hospitals, while those without symptoms are quarantined at home to ensure hospital resources are not stretched to the maximum," he told the New Straits Times.
He said if the government wanted to enforce a lockdown, it should be announced in advance, at least two weeks before.
Sunway University Business School Economics Professor Dr Yeah Kim Leng said a total lockdown could be avoided through more effective testing, contact tracing, isolation and quarantine measures.
For instance, he said, Singapore rigorously conducted testing and contact tracing to contain the Covid-19 outbreak at workplaces, especially in areas with a large foreign worker concentration.
"A total shutdown should only be the last resort.
"Even then, it should be specific or localised, confined to outbreak areas, rather than covering an entire state or country.
"A blanket ruling would unduly penalise firms and businesses that observe workplace SOP diligently.
"The lives versus livelihood trade-off may be less costly if firms are given the option to continue operating, but they will have to bear fully the shutdown, quarantine and treatment costs should there be an outbreak on their premises."
The country, said Yeah, would have to brace for an economic impact similar to the 17.1 per cent second-quarter gross domestic product (GDP) contraction recorded last year if a total lockdown was extended by two months.
Universiti Kuala Lumpur Business School economic analyst Associate Professor Aimi Zulhazmi Abdul Rashid concurred with Yeah.
"The losses that the country may incur, if a full lockdown is implemented, may be equivalent to the loss (suffered) during MCO 1.0 (last year), where the impact was greatly felt in the second quarter, making Malaysia the worst performing economy in Southeast Asia.
"This will also stop the economic recovery (momentum) that we experienced in the third and fourth quarters, with major repercussions for the electrical and electronic (E&E) sector, as well as glove manufacturers' output to the global supply.
"Malaysia is a major supplier of microprocessors to the E&E industry, as well as supplying two-thirds of the glove requirements globally.
"It will sever the value chain in the economy from logistics to transportation, causing bigger losses than that registered in the second quarter due to the contracts in hand and shortage of supply."
Aimi Zulhazmi said Malay-sia's export numbers would "head south" if MCO 1.0 was reinstated.
"It will cause a snowball effect, creating large ripples to the economy and social (sector).
"MCO 2.0 is shedding at least RM600 million daily, which is equivalent to 0.8 per cent of the reduction to the government forecast of 6.5 to 7.5 per cent (in GDP growth target for 2021).
"A total lockdown will multiply the decline in the GDP numbers."
Razman and Aimi Zulhazmi said the government needed to formulate and introduce additional assistance to cushion the disruption to the economy caused by a total lockdown.
"(The government should) come up with a mitigation plan, such as additional fiscal stimulus and moratorium to all. And maybe some measures to ensure employers retain their employees," said Razman.
Aimi Zulhazmi said the Perlindungan Ekonomi dan Rakyat Malaysia (Permai) stimulus package was introduced because of MCO 2.0.
"A total lockdown will further suppress the economic recovery, with more people to be impacted, businesses will be closed, small- and medium-scale enterprises will be at a loss and unemployment figures will skyrocket.
"The government may have to prepare more fiscal stimulus to save the people and businesses to help them survive these tough times.
It should conduct a cost-and-benefit analysis to balance the requirements of economic recovery and health concerns."
Source: https://www.nst.com.my/news/nation/2021/01/660199/total-economic-shutdown-should-be-last-resort-say-experts