Economists: Get the people to spend

 

Driving the economy: The government must create an environment that is safe for people to leave their houses and carry out activities to revive businesses, say economists. — SS KANESAN/The Star

PETALING JAYA: Merely lifting the conditional movement control order will not be enough to revive the economy if the people are not convinced it is safe to go out and spend to increase demand for businesses, say leading economists.

As the National Security Council meets today to decide if it is time to lift the conditional MCO imposed on all states except for Kedah, Melaka, Terengganu and Johor, economists say the biggest problem other than the Covid-19 pandemic must be seriously addressed to save livelihoods.

(On Nov 9, NSC imposed conditional MCO on certain states and until today, only four states have had the conditional MCO lifted with certain areas still being closed off due to clusters there.)

Economists say that what is needed is for the government to practise selective liberalisation, where only areas where there is Covid-19 infection is cut off until the situation is stabilised there.

Under the current NSC ruling, this would mean targeted enhanced MCO.

Economist Tan Sri Lin See Yan, who was the deputy governor of Bank Negara Malaysia, said a blanket ban on all areas in an economic slowdown was never the answer as it would eventually lead to a bigger recession.

“The past five global and local economic recessions have been due to lack of demand from consumers.

“The government can lift all the MCOs and barriers that they have put in place, but if the people still feel unsafe to go out there and spend, there will be no revival of the economy. Small businesses which our economy is mostly made up of, have already shut because there was no demand even when they opened for business. Expanding is also out of the question then.

“It is vital for the authorities to play the psychological game and let people know that with SOPs in place, it is safe to leave your homes to spend money and continue with economic activities, ” said Lin.

He said prior to this, the government successfully managed to put the fear into everyone that there is a virus out there, to stay home, wash hands frequently and wear masks.

“Now, the government must create an environment that it is safe to leave your houses and carry out our activities and spend our money at hawker stalls and buy from businesses.

“This will lead to more economic activities which will in turn lead to more spending

“For those who are still uncomfortable or fear the virus too much, the government must make it cheap for them to be tested and the results must be available as soon as possible. Right now, not only do you pay so much for the swab test but you have to wait for a day or two for the results. In private hospitals, it takes only six hours to get the results but it is too expensive for anyone in this economic climate, ” said Lin.

Economist Professor Dr Yeah Kim Leng said that the current third wave of the pandemic and conditional MCO was expected to continue to dent the recovery momentum of the economy.

“If the present pattern of virus cluster breakouts and localised CMCOs persist, then a full economic recovery can only occur when a safe vaccine is rolled out and reaches a large segment of the working population. Only then can social and economic activities normalise and complement the production activities to give the economy a boost.

“If the foreign workers and local clusters can be contained with confidence, then lifting the conditional MCO will help to protect livelihoods.

“If community spread is inevitable due to limited testing, contact tracing and quarantine, then extending the conditional MCO will be prudent to avert hospitalisation capacity, medical staff and frontline workers from being overwhelmed.

“As long as factory production and businesses continue to operate, the localised conditional MCO will be less damaging to the economy.

“Nevertheless, the current third wave and restrictions are expected to dent the recovery momentum and prevent an earlier exit from the ongoing recession.” said Yeah.

On Nov 27, the medical advisor to the Prime Minister Tan Sri Jemilah Mahmood had said that to contain the third wave, it might be pertinent to look at amnesty for undocumented foreign workforce who now seem to make up a big part of the current clusters.

On Dec 1, Health Director-General Tan Sri Noor Hisham Abdullah said that the rise in a number of recent cases were mostly from construction sites and factories. - Star