Emergency declaration to drag on Malaysia’s economic rebound

14 January, 2021 12:00 AM printer

KUALA LUMPUR: The state of emergency declared this week allows Malaysia’s government to enact immediate laws to support the virus-battered economy, but could dent consumer confidence and scare off investors.

Greater powers under Tuesday’s decree could help the government implement concrete solutions to the country’s health crisis and economic downturn, according to analysts at CGS-CIMB. Prime Minister Muhyiddin Yassin said it would allow for ordinances to fight “economic sabotage, monopoly, and excessive price hikes.”

The emergency, which could last until Aug. 1, coincides with a two-week lockdown that led analysts to shave as much as 1.5 percentage points off their forecasts for annual economic growth. Regions placed under stay-at-home orders contribute more than two-thirds of the country’s gross domestic product, report agencies. The measures come as record numbers of Covid infections stretch Malaysia’s health system to the breaking point. While less severe than the two-month lockdown enacted last March, the restrictions will mean a loss of about 3 billion ringgit ($742 million) per week in private consumption, according to an RHB Bank estimate.

“With its recovery momentum stymied, it will be even harder now for the economy to reach the 6.5-7.5% GDP growth target that the government has in mind,” Wellian Wiranto, an economist at Oversea-Chinese Banking Corp., wrote in a research note.

The emergency decree does bring a measure of political stability to Malaysia for the first time since infighting early last year toppled the coalition and lifted Muhyiddin to power. With parliament potentially suspended until August, the prime minister doesn’t have to worry about fresh elections anytime soon.