Image credit: The Straits Times
With unending lockdowns amid surging Covid-19 infections, the pace of vaccinations needs to be speeded up and the spread of Covid-19 better controlled.
Dynamic measures are required to avoid further dampening growth and exacerbating the uneven recovery between advanced and emerging economies.
This is not just a problem in Malaysia but a big part of what ails emerging economies which used to stage stronger recovery.
Unlike the vaccination programmes in developed economies, the lack of access to vaccines has left emerging economies struggling with second or third wave of infections, including those from new variants of Covid-19.
In Malaysia, many small and medium scale enterprises (SMEs) have called for increases in financial aid, said Small and Medium Enterprises Association national secretary Yeoh Seng Hooi, when in fact, no amount of aid is sufficient if the Movement Control Order (MCO) persist.
“We are asking for the SMEs in industrial estate and those which are vendors to the larger companies as well as the SMEs, to be included in the mass vaccination programme, ’’ said Yeoh.
The Ministry of International Trade and Industry (Miti)’s mass vaccination programme is laudable, but there should also be more co-ordination between Miti, Ministry of Health (MOH) and Ministry of Science, Technology and Innovation (MOSTI), added Yeoh.
Even when the multinational companies and larger companies are willing to be part of the mass vaccination programme, the limiting factor is the supply of vaccines which comes under MOSTI.
The venue for vaccination has to be approved by MOH, said Yeoh, who
advocates for decentralisation where states that have the means should be allowed to buy the vaccines directly from manufacturers.
With decentralisation, states with industrial clusters can help to expedite the rollout while the private sector can also be mobilised.
“SMEs, on their own, are crying for help and can only ride on the mass vaccination initiatives under the umbrella of the larger companies or state governments, ’’ said Yeoh.
On competitiveness in the tourism sector, there are concerns that Malaysia may lose out when other countries are ready as in having their people vaccinated especially the tourism frontliners.
“Even before the pandemic, we were losing out; we are now falling further behind compared with others in the region.
“Under the national immunisation programme, priority must be given to the tourism sector to restore confidence on its impending recovery, ’’ said Malaysian Association of Hotels CEO Yap Lip Seng.
There should be mass testing and isolation of Covid-19 positive cases.
Depending on developments in the next few weeks, the forecasts for the Malaysian retail sector will be likely be adjusted.
It is our ability to control Covid-19 that is important, and the rising positive cases may not have direct relationship with the pace of vaccination, said Retail Group Malaysia managing director Tan Hai Hsin.
In Taiwan, the retail sector had recovered even before the majority of the population was vaccinated.
The current percentage vaccinated in China, at 1%, is not high but people are out shopping and travelling without fear, added Tan.
“An immediate threat to growth is softer-than-expected demand as a result of pandemic lockdowns and the inevitable disruptions, ’’ said Fortress Capital CEO Thomas Yong.
A poor first half performance may deal a mortal blow to the private sector in Malaysia.
It is now mid-year and in a MCO situation, people are unable to move or spend during the busiest festive season, Hari Raya, in the year, said former Inter-Pacific Securities head of research Pong Teng Siew.
There are now worries that the real Gross Domestic Product growth for 2021 may come below the lower end of the forecast of 6%, said former RHB Research Institute chief Asean economist Peck Boon Soon.
Last week, Bank Negara governor Datuk Nor Shamsiah Mohamed Yunus said growth forecasts had already priced in uncertainties related to Covid-19.
Larger corporates with deeper balance sheets and export-oriented businesses are likely to do better, as the pace of vaccinations progress faster in the West. SMEs that focus on the domestic market especially the food and beverage as well as travel sectors, continue to face tough times, said Etiqa Insurance and Takaful chief market strategist Chris Eng.
Among the risks to recovery is pre-mature withdrawal of fiscal and monetary support.
New virus mutations could spark another wave of infections during the vaccination campaign or prove resistant to current vaccines.
An unexpected rise in US interest rates poses financial risks especially to emerging economies that have a high foreign currency debt burden; it also causes volatility in financial markets.
With US inflation surging to a 13-year-high of 4.2% in April, short term interest rate futures now reflect 100% certainty that the Federal Reserve will likely hike interest rates by the end of next year, instead of waiting for 2023, Reuters said.
Reflecting the recovery in demand in advanced countries, commodity prices including that of crude oil, are rising.
“Rising raw material prices have increased the cost of production, forcing some pass-through to consumers, ’’ said Socio Economic Research Centre executive director Lee Heng Guie.
This poses a problem to emerging economies that are still facing soft demand, poor job markets and reduced spending power.
Parts of the world, especially developing nations, may see all gains the past half decade, wiped out.
They will be forced to dig deep into fiscal reserves and maybe even foreign exchange reserves, to buy vaccines and attempt to spend their way out of the pandemic, added Pong.
Prolonged lockdowns and other economically damaging measures will likely test the patience of the electorate in many countries.
Geopolitical tensions especially relating to the big power tussle between the US and China are closely watched for risks.
Vaccinations may reduce the contagion and the severity of the impact but it is important to bring down the curve of Covid-19 infections, said Areca Capital CEO Danny Wong.
It looks like the pre-requisite to recovery cannot be met as Covid-19 cases keep flaring again and again.
But we cannot lose hope but in the face of new Covid-19 variants, we will try again through our self-discipline, to help bring the numbers down.
Yap Leng Kuen is a former StarBiz editor. The views expressed here are the writer’s own.
Source: https://www.thestar.com.my/business/business-news/2021/05/17/need-to-accelerate-pace-of-vaccinations