The Malaysian Insight

THE economy will shrink in the first quarter of 2021 but not to the extent of a double-digit decline as seen when the movement control order (MCO) was first introduced in March last year, said experts.

Economists and traders said this is mainly because the version of the MCO that is currently enforced is less strict, leaving most sectors open for business.

Lee Heng Guie, senior economist at the Associated Chinese Chambers of Commerce and Industry of Malaysia said the economy will not fare very well in the year’s first quarter because of movement restrictions, which are in place until least February 18.

He said continued extension of the MCO is having an effect on businesses.

“January and February are two critical months because businesses usuallly do better at the beginning of the year.

“Companies will then have reserves to cover the following months of lower performance as the market is relatively quiet after the Chinese New Year.

“However, the current MCO is not as stringent compared to last year’s, so its impact will not be so devastating as to lead to a double-digit shrinkage of the economy.

“Maybe the growth figures of specific industries will not be pretty. It appears that the figures for retail and tourism will be worse,” Lee said.

Dr Hoo Ke Ping, economic adviser at the Kingsley Strategic Institute (KSI) for Asia Pacific, said some industries relied on Lunar New Year business which could account for up to half of their annual turnover.

It is important to ensure there is good communication between the government and industry, he said.

Hoo said there should not be conflict between keeping the economy open and taking measures to prevent the epidemic from spreading further.

“For example, limiting the number of people who can be in the supermarket at one time does not affect the overall business, and the same is true for barbershops.”

He urged the business community to be more proactive in the efforts for SOP compliance.

Instead of complaining each time a new SOP is introduced, offer the government ideas for SOPs that are more relevant and effective, he said.

Many complain they are affected but the problem is that they have no way to communicate with the government, he added.

Lee said the feedback from the ground is that the government’s decision-making process is not transparent and is often contradictory.

“There may be many workplace clusters – the construction and manufacturing sectors were mentioned. But were other sectors also involved?

Lee said he has heard that the International Trade and Industry Ministry was talking with the business community to resolve uncertainties and instabilities.

The government is not expected to allow interstate travel, especially during the Lunar New Year holidays, he added.

“There were multiple cross-state infection cases that arose during Hari Raya, I don’t think they will allow it now.” – February 1, 2021.