Malaysia's Q4 GDP recovery hinges on pandemic fight amid CMCO

By NST Business October 14, 2020 @ 11:23am

KUALA LUMPUR: The Conditional Movement Control Order (CMCO) for certain states will add to the pressure on the pace of economic recovery in the fourth quarter (Q4).

Hence, the next two weeks would be especially critical, said OCBC Bank economist Wellian Wiranto.

Nevertheless, Wellian said there remains hope that the more stringent measures can flatten the Covid-19 pandemic curve for Malaysia once again. 

"This would then allow growth momentum to remain on the broad if gingerly uptick – and let Bank Negara Malaysia hold its Overnight Policy Rate on November 3," he said in a report yesterday.

The government announced the CMCO yesterday for areas that have seen the fiercest upticks in Covid-19 cases in the last few weeks.

For an initial period of two weeks, there will be a ban on social and religious gatherings and schools and universities will be shut.

So far, the CMCO is not applied across the country just yet, but only for Kuala Lumpur, Selangor and Sabah.

Wellian said together, these areas comprised a lion's share of Malaysia's gross domestic product.

"Selangor is an industrial powerhouse that makes up nearly a quarter of the economy on its own. KL, being the centre of business axis commands a good 16 per cent.

"Together with Sabah, the CMCO thus affects nearly half of the total economy," he added.

Wellian said the silver lining was that unlike during the more stringent, full-scale MCO that Malaysia had suffered through in March-April, broad economic activities can still be allowed to operate, albeit with social distancing restrictions in place.

"Factories can still run their productions and malls can still open, for instance. Still, whatever the official guidelines may be, Malaysians may shy away from crowds on contagion fear once again anyway, hitting consumer spending.

"Coming at a time when loans moratorium has expired and households need to service their mortgages and car loans once more, it would add to the pressure on the pace economic recovery in Q4," he said.