MCO 3.0 not expected to significantly impact economic growth

 

The implementation of the third movement control order (MCO 3.0) nationwide is not expected to have a significant impact on the country’s economic growth as almost all economic sectors are allowed to remain operational.

Finance Minister Tengku Zafrul Abdul Aziz (above) said the closure of all economic sectors would be more detrimental for vulnerable groups.

“Shutting down all economic sectors like the way it was during MCO 1.0 will see unemployment reaching seven percent (or more than one million unemployed persons), mostly affecting self-employed, youths, women, as well as low-skilled/low-income groups.

"Apart from unemployment, the self-employed and about 2.8 million micro, small and medium enterprises (SMEs) would also be more at risk of experiencing a reduction of income due to the economic closure," he said in a statement today.

Zafrul said due to MCO 3.0, several segments of the services sector which are based on physical interaction, including tourism, are expected to continue to be affected due to interstate travel bans and restriction on social activities.

However, he said the government is confident the country's gross domestic product (GDP) will continue to grow at the projected rate of 6.0 percent to 7.5 percent, in line with estimates from the International Monetary Fund (6.5 percent), World Bank (6.0 percent) and Asian Development Bank (6.0 percent).

“Additionally, the country's economic recovery will also be supported by the economic growth of major trading partners such as Singapore which recorded a growth of 0.2 percent, China (18.3 percent) and the United States (0.4 percent) in the first quarter of 2021 (Q1 2021).

"The implementation of the National Covid-19 Immunisation Programme will also drive the reopening of various economic sectors and consumer sentiment recovery, and will subsequently boost the Malaysian economy’s growth and resilience," he said.

The minister said the government remains aware that the country's economic growth is still facing risks and uncertainties in the ever-changing domestic and global economic environment.

The risks include new Covid-19 variants worldwide, leading to the re-implementation of tighter containment measures which would subsequently affect global economic growth; as well as disruption of Covid-19 vaccine supply that would impede efforts to achieve herd immunity.

Commenting on the Q1 2021 GDP results announced by Bank Negara Malaysia (BNM) and the National Statistics Department (DOSM) today, Zafrul said the results reflected encouraging economic performance.

He added that the results show the country continues to move towards recovery, in spite of the implementation of MCO 2.0 during the period.

The GDP contracted by -0.5 percent year-on-year (y-o-y) in Q1 2021, a much smaller contraction compared to -3.4 percent recorded in Q4 2020.

“GDP growth in Q1 2021 was driven by the manufacturing sector which grew by 6.6 percent y-o-y (Q4 2020: 3.0 percent) as well as the agriculture sector which expanded by 0.4 percent (Q4 2020: -1.0 percent) y-o-y.

“Overall, all economic sectors in the country have shown recovery signs as evidenced by the smaller contraction compared to the previous quarter,” he added.

- Bernama