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Tough but needed

13 Jan 2021 / 10:59 H.

PETALING JAYA: Saving lives outweighs the negative impact of a state of emergency and the implementation of “Movement Control Order 2.0” in five states and three federal territories on the economy.

Economists see these measures as necessary despite the obvious repercussion to the economy.

“Health must be given greater weight. We must take greater precautions and steps to control the pandemic, including quickening the distribution of vaccines,” said Asia-Europe Institute at University of Malaya professor of economics, Datuk Dr Rajah Rasiah.

But he pointed out that the declaration of emergency was sudden and unexpected.

“The King’s announcement of an emergency came to me as a surprise. I was expecting and hoping for an MCO because of the surge in infections and deaths.”

He believes the King aims to give the ruling government room to concentrate on governance while combating the pandemic.

Rajah suggested more strategies be implemented to get back to pre-pandemic economic conditions.

“A short MCO is necessary to check the spike in cases. If it is continued beyond a month it will spell another recession as this will slow down work and economic interactions.”

He urged the government to extend support to businesses and poor individuals, including moratoriums on loans.

“The government can do this as its foreign reserves increased to over US$106 billion (RM430.1 billion) last month, partly accounted for by a depreciation in the US dollar. We also have funds from the natural resources fund.”

He also thinks the government should pursue the approach taken by Nordic countries and Germany to ensure unemployment is controlled and that B40 individuals are shielded from serious problems.

Meanwhile, Sunway University economics professor Prof Dr Yeah Kim Leng told theSun that although the economy will take a hit, it will be less severe than during the previous Covid-19 waves.

“The recovery expected this year will be stalled but the momentum is unlikely to be derailed given the higher likelihood of suppressing the pandemic with the vaccines in near sight.”

Yeah said the economic impact can be managed with further fiscal support for affected industries and households.

Although a slight erosion of fiscal deficit and debt metrics of 0.1% to 0.2% points of gross domestic product is expected, it should be recoverable when the economy is on the mend, he added.

With the latest MCO, it can also be expected that business casualties and prolonged hardships faced by the low-income group will be on the rise.

Yeah believes that a quick roll-out of the 2021 Budget relief measures could offset the economic trauma.

“The loan moratoriums and EPF withdrawals that are included in Budget 2021 may be adjusted to accommodate the impact of the new MCO, especially if extended beyond two weeks, which is likely based on the two previous episodes.”

The Yang di-Pertuan Agong Al-Sultan Abdullah Ri’ayatuddin Al-Mustafa Billah Shah yesterday proclaimed a state of emergency would be enforced until Aug 1, or until Covid-19 is brought under control.

Prime Minister Tan Sri Muhyiddin Yassin on Monday announced full-scale MCO restrictions in Selangor, Penang, Malacca, Johor, Sabah, Kuala Lumpur, Putrajaya and Labuan.

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