KL relaxes curbs on key sectors amid fears of bigger slump

The government has eased curbs on some key industries amid fears Malaysia's economy will slump further with most business activities on pause during this fortnight's near-shutdown.

Oil and gas and its downstream manufacture, as well as electrical and electronics production, were shown leniency despite the nationwide restricted movement order in effect until the end of the month.

Food, household and medical items are listed as essentials along with fuel and lubricants, according to a government gazette on the order. The National Security Council said that electronics, petrochemicals such as plastics and polystyrene as well as fertilisers and pesticides were deemed "part of the supply chain" for the delivery of these essential items.

"The government will continue to cooperate with the industrial community especially in ensuring crucial supplies are not cut off," it said in a statement late yesterday, confirming The Straits Times' report earlier the same day.

The Malaysian Palm Oil Association also said late yesterday the government had given them an exemption, allowing the world's second-largest producer to continue producing the commodity that makes up two-thirds of global edible oil supply.

Last month, the government downgraded its growth forecast for the year from 4.8 per cent to between 3.2 per cent and 4.2 per cent when announcing a RM20 billion (S$6.6 billion) stimulus package to soften the outbreak's impact.

Prime Minister Muhyiddin Yassin said last week the Covid-19 spread is set to erase 0.8 per cent to 1.2 per cent of the gross domestic product.

"The economic weakness is not confined to just the two-week movement control order as the effects of Covid-19 have been felt by the tourism and retail sectors since February," said a UOB report yesterday, which marked down this year's growth to 2.4 per cent.

Barclays' regional economist Brian Tan also expects Bank Negara Malaysia (BNM) to "cut its policy rate by 50 basis points to 2 per cent by May", a record low not seen since the 2009 global financial crisis.

"We noted previously that BNM would likely continue to ease only gradually unless the outbreak triggered a more severe economic downturn... That downturn appears to be materialising," he said.

Several electronics firms in Penang, Malaysia's so-called Silicon Valley, told ST they had been given the green light to operate.

Conditions set included routine sanitisation, temperature checks and reducing personnel at business premises to a minimum or to at least below 50 per cent, with others allowed to work from home.

"We remain committed to serving our customers over the next two weeks," UWC Berhad's deputy chief executive Matin Ng told ST.

Automation systems maker Pentamaster confirmed it would "operate as normal", and staff at the RM100 billion Pengerang Integrated Petroleum Complex in Johor have reported for work.

Aside from ensuring the flow of essential goods during this period, these sectors are also key contributors to Malaysia's economy, already hammered by the slowdown from the outbreak and an ongoing rout in oil prices.

Oil and gas, including downstream manufacturing, is worth a fifth of the economy, while the electrical and electronics industry makes up nearly 40 per cent of exports.

But small enterprises on razor-thin margins feared they could collapse with no revenue to pay outstanding overheads. The retail sector is expected to shrink by 3.9 per cent in the first quarter.

Maybank is providing some relief to small and medium-sized enterprises and individuals by offering to restructure financing, including a moratorium on loan repayments for up to six months, as well as collateral-free financing of up to RM1 million until the year end.

Hoteliers concerned over whether they had to turf out guests with ongoing stays were also relieved to find hospitality listed as an essential service.