MCO 4.0: Short term pain, long term gain on economy
31 May 2021
Whilst damaging to the economy in the short term period, the latest Phase 1 of total lockdown of the movement control order (MCO 4.0) is very much needed to break the chain of COvid-19 infections and allow the economy to reopen on a clean slate thereafter.
AmInvestment Bank Bhd (AmInvestment Bank) outlined the importance to consider a total lockdown’s impact beyond the lockdown period itself, be it two weeks, four weeks or longer, dependent on the situation.
“If the lockdown is effective in breaking the chain of the Covid-19 infections, the economy can reopen on a clean slate thereafter,” it said in a note yesterday.
“From the standpoint of businesses, the loss of incomes during the lockdown will be temporary and it could be recouped if the lockdown is successful in containing the virus spread, enabling businesses to return to normalcy or close to normalcy.
“As such, we are in no hurry to slash our market and corporate earnings forecasts.”
On a grimmer scenario where a lockdown is resisted despite surging Covid-19 infections, AmInvestment Bank believed the economy may languish due to declining productivity, dented consumer spending and excessive diversion of resources towards the quarantine/treatment of Covid-19 patients.
To note, economic sectors that are considered essential and allowed to operate include food production/processing/distribution, healthcare, utilities, financial services, communications and logistics.
The research team with MIDF Amanah Investment Bank Bhd (MIDF Research) viewed the Phase 1 total lockdown as being more akin to MCO 1.0 rather than the second or third versions as the movement restriction have been tightened.
“As an example, shopping complex will be closed except only supermarkets, hypermarkets and departmental store that has a F&B section, basic necessities, pharmacy, personal care, convenience store, mini mart and restaurants for takeaway and delivery, which are similar to MCO 1.0,” it observed.
“However, there is some twist to this as some essential economic activities are allowed to continue with some restrictions in place, as compared to only necessary economic activities in MCO 1.0.
“For example, Ministry of International Trade and Industry announced 18 manufacturing and manufacturing-related services (MRS) sectors that are allowed to operate under MCO 4.0, subject to approval from the ministry.
“Thirteen of the sectors are allowed to operate at 60 per cent workforce capacity while the remaining five are permitted to operate with 10% workforce.
“All other manufacturing activities are not allowed to operate during this period. Some other sectors are also allowed to operate such as agriculture, fisheries, livestock, plantation and commodities.”
If MCO 4.0 succeeds in reducing the new daily Covid-19 cases, the Government will implement the Second Phase lockdown will allow the reopening of some sectors of the economy that does not involve large gatherings as well as those that can adhere to physical distancing.
The Second Phase will implemented for a period of four weeks after the end of the MCO 4.0. After this, the Third Phase, which is to execute the current MCO (MCO 3.0) where the social activity is not allowed but almost all sectors of the economy are allowed operate subject to strict SOPs as well as restricted physical presence at the workplace.
“However, the decision to move between phases will be subject to a risk assessment by the Ministry of Health,” MIDF Research added. “Evaluation will be made based on developments current daily cases and hospital capacity across the country for treating Covid-19 patients.”
Source: The Borneo Post