KUALA LUMPUR, July 28 — The Malaysian Rating Corporation Berhad (MARC) called on the government to give businesses the flexibility to tailor their own Covid-19 measures, arguing that blanket lockdowns don’t work and are grossly inefficient.
Firdaos Rosli, the firm’s chief economist, said in a policy paper published today that there is no evidence that the various movement control orders enforced since the onset of the Covid-19 pandemic had been effective in stemming the highly infectious respiratory disease.
The view goes against the popular view held by government officials and public health experts, who have argued that strict movement curbs had succeeded in mitigating the spread of the coronavirus.
MARC said while the small number of cases logged during the first MCO period are often cited as proof that mobility restrictions work, the low testing rate at the time could have masked the true extent of the spread, resulting in the underrepresentation of actual positive cases.
“The effectiveness of MCO 1.0 is still unclear,” the policy paper concluded.
“A counterfactual case study to MCO 1.0, such as a mild lockdown or a similar lockdown in another period to the same population, is absent. A difference-in-difference approach may provide an estimated parallel assumption.
“There was no mass testing being carried out before 4Q2020. Therefore, there is a possibility of an under-representation of actual positive Covid-19 cases from 4Q2020 onwards.”
The rating corporation projected the Malaysian economy to grow 3.9 per cent on a year-on-year (y-o-y) basis, a second downward revision since its initial projection of 5.6 per cent y-o-y in January 2021, before the second and third cycle of lockdown.
MARC estimated the overall national output losses due to lockdowns in 2021 will amount to RM23.2 billion, but suggested it could be more if taking into account qualitative costs like deteriorating health and wellbeing and setbacks to human capital development.
Job losses from the third MCO would increase by 100,000 workers, it projected, with the unemployment rate to remain elevated for a more extended period than initially estimated.
The current wave of infection, which has been averaging in the five digits for nearly a week even as most parts of the country have been placed under a strict lockdown, has dashed hopes of a strong recovery.
Minister of Finance Datuk Seri Tengku Zafrul Abdul Aziz recently said the government would revise its growth forecast downward in the 4 per cent region, with the official figures to be made next month.
The soaring cases have led many public health experts and some government officials to rethink their response to the pandemic, with the view that Covid-19 would become endemic even as more of the population get vaccinated.
MARC echoed the view. Its chief economist suggested regulators place “floor” level standard operating procedures so businesses themselves could determine how best to implement Covid-19 mitigation measures.
“Blanket SOPs are grossly inefficient and punitive to capital owners who cannot adjust their business model accordingly,” he said.
“It disincentives capital owners to find new ways to operate more efficiently, thus leading to a deadweight loss to both consumers and producers.”
This could entail letting shops decide the best times to operate to avoid huge crowds, or for shopping malls and office buildings to open more channels for movement such as increasing the frequency of elevators, or adding escalators, entrances and exit points.
Most businesses in states still under Phase One of the National Recovery Plan have remained shuttered for over two months. Industry representatives said thousands of their members are in dire straits, with many facing the prospect of foreclosure as the lockdown drags on.
MARC said the government must realise by now achieving zero positive Covid-19 cases is “ambitious” in the foreseeable future, as it urged for the immediate reopening of the economy.
“The government must find ways to ‘live with the virus’ as the Covid-19 virus may not be entirely eradicated unless the world population is adequately protected,” it said.
The International Monetary Fund (IMF) today revised this year’s economic outlook for Asean-5 countries by 0.6 per cent to 4.3 percent, on the back of rising Covid-19 infections hitting the region.
The Asean-5 countries are Indonesia, Malaysia, the Philippines, Thailand and Vietnam.
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