Two and a half years of growth wiped out by MCO, says expert

 

The movement control order has been harsh on our economy, harsher than had been predicted by the government and economists, says Geoffrey Williams.

PETALING JAYA: The pandemic and the ensuing movement control order have been hard on Malaysia, sending the country’s gross domestic product (GDP) shrinking back to the level it was at in 2018 – more than two years ago.

It was a more severe setback than most, including the government, had expected, and a new development plan is needed to get back on track, says an economist.

“The overall level of GDP is back to where it was in the middle of 2018, so the lockdown has reversed two and a half years of economic development in Malaysia,” said Geoffrey Williams, an economist at Malaysia University of Science and Technology.

“Data from the Statistics Department put Malaysia’s real GDP at RM1.36 trillion in 2018 and RM1.34 trillion in 2020.

“GDP grew by 4.3% during 2019 but fell by 5.6% in 2020, so it wiped out 2019’s growth and took us back to the middle of 2018. In per capita terms, Malaysia is further away from high-income status.”

Williams was commenting on Bank Negara Malaysia’s (BNM) announcement that the country’s GDP contracted by 5.6% in 2020, the biggest decline since the Asian financial crisis – when it expanded 7.4% in 1998.

Malaysia’s GDP grew by 4.3% in 2019 and 4.7% in 2018.

This year’s contraction was also more severe than the finance ministry’s projection of 3.5% to 5.5% revealed earlier this month.

Despite the more than RM300 billion in stimulus measures aimed at battling the economic fallout from the MCO, Williams said the lockdown had damaged Malaysia’s economy to the extent that its underlying growth potential would be much lower in the future unless the government focuses on a new development plan.

“The strength of recovery depends on ending the MCO immediately.

“The government must now separate economic policy from health policy and recognise that you do not reduce mortality by locking down the economy.

“…Because MCO 2.0 has already cost RM24.5 billion, or 1.7% of GDP, we expect the growth rebound in 2021 to be much lower than what we had hoped for.”

At a joint virtual briefing with BNM governor Nor Shamsiah Mohd Yunus on Thursday, Chief Statistician Mohd Uzir Mahidin said last year’s contraction was mainly due to the enforcement of the MCO to curb the Covid-19 pandemic.

Saying that loosening economic restrictions during the current MCO was a step in the right direction, Center for Market Education CEO Carmelo Ferlito hoped to see more discussions about the country’s future economic path.

Like Williams, Ferlito also stressed that lockdowns have had minimal impact in containing the virus across the world, going on to furnish a list of almost 100 peer reviewed studies to prove his point.

“We can’t change the past, so to focus on these figures (2020 GDP) per se would be a waste of time,” he said.

“Let’s bear in mind that these are not just cold numbers, but behind them there are families struggling to make ends meet.

“What do we do now in order to reverse the path? Are we on the right track?” - FMT