Malaysia's worsening Covid-19 situation exposes serious economic, political fault lines

On Saturday, the number of confirmed cases reached a record of 4,275 new patients. PHOTO: REUTERS

KUALA LUMPUR - Percussionist Muhamad Al Hafiz Khalil, a full-time musician in the once-vibrant night scene in the Malaysian capital, has yet to secure a gig in a pub or club since March last year when the government first imposed a public movement control order (MCO) to deal with the Covid-19 pandemic.

The meagre savings for the father of two have long run out and, since early this year, Mr Hafiz, who is fondly known as Hafiz Smurf among fellow musicians, has been doing odd jobs and turning to financial handouts from close friends to put food on the table.

"The first lockdown came out of nowhere and we did not get any chance to consider options. Today there are none for me if I want to think about a career in music," said the 32-year-old.

He is not alone feeling that life is not going to get better.

Stories like his in Malaysia's little-tracked informal economy - made up largely of daily wage workers in the construction and services sectors, as well as musicians - abound with one constant; the slide from barely making ends meet into poverty.

Official figures show that the informal sector made up 8.3 per cent of total national employment in 2019, or roughly 1.2 million people in the labour market estimated at over 15 million.

Now, with the prospect of prolonged lockdowns because of the worsening Covid-19 situation, the country's economic outlook is looking dire and analysts have expressed concerns that the social repercussions could have both serious economic and political implications for Malaysia which is facing its worst recession since independence in 1957.

The country kicked off its anti-Covid-19 campaign in March last year with what turned out to initially be one of the region's most effective movement control initiatives and nation-wide health response programmes.

By September though, the tide began to turn in the face of a lackadaisical attitude by officials and the people. The country is currently confronting an infection wave that has run amok.

After weeks of downplaying mounting public speculation that the government's battle plan to beating the virus had badly stumbled, Prime Minister Muhyiddin Yassin acknowledged in a nationally televised broadcast on Jan 12 that the uncontrolled spread of the coronavirus had left the government with little choice but to re-impose strict movement control lockdowns.

A day later, a national state of emergency was declared, a move the wobbly Muhyiddin administration declared was needed to deal with the pandemic. But most of the prime minister's political opponents and many ordinary Malaysians believe the move was motivated by self-preservation instincts of the embattled leader.

As the number of cases continue to mount unrelentingly, health officials are now considering escalating the MCO into a full economic lockdown for two weeks when current restrictions expire on Feb 4.

Hospitalisations and deaths are posting new records. Medical front-liners are working extended hours and private hospitals are being directed to treat Covid-19 patients because state-owned hospitals are being stretched to breaking point.

Medical workers collecting swab samples for coronavirus testing, in Petaling Jaya on Jan 18, 2021. PHOTO: REUTERS

On Saturday, the number of confirmed cases reached a record of 4,275 new patients.

Government and security personnel on the front lines of the pandemic fight believe that a full economic lockdown will not help.

"Based on statistical models, the number could breach five thousand infections per day and go much higher before we see any turnaround," said one senior government medical officer, who requested anonymity.

This dire prospect is set to have serious economic ramifications. Apart from the devastation it could wreak on businesses - big and small - struggling to break even, economists say earlier projections that the economy will rebound strongly in 2021 is now looking overly optimistic.

The country's key engines of growth - domestic consumption, private investment, government expenditure and exports - are all faltering.

Malaysia's RHB Investment Bank noted in a report this month that serious weaknesses to the economy due to concerns that sluggish expansion in the construction and retail sectors, coupled with slower take-off in big-ticket government projects due to the current administration's financial limitations are likely to put a dampener on growth.

RHB has revised its 2021 GDP forecast to 5.4 per cent, down from 6.3 per cent. GDP should contract by 5.5 per cent in 2020.

Economists are saying that initial projections that Malaysia's economy will rebound strongly in 2021 are looking overly optimistic. PHOTO: AFP

Several economists have cautioned that Malaysia needs to quickly and substantially expand the stimulus package of roughly RM15 billion (S$4.91 billion) Mr Muhyiddin announced last week with new strategies, including and micro loans for those in the informal sector, direct cash benefits in the form of ration cards and easy credit for businesses, particularly the small and medium industries.

"The options are narrowing and a real big threat to the economy is a potential downgrade in its sovereign ratings," noted a chief economist with a state-controlled Malaysian bank, who requested anonymity because of the sensitivity of the situation amid the state of emergency.

Foreign and local investors generally shrugged off the downgrade in early December by Fitch Ratings Inc of Malaysia's Long-term Foreign-currency Issuer Default Rating to "BBB+" from "A-", just two notches above junk status.

But the most recent lockdown, coupled with the declaration of a state of emergency and the prospect of more economic pain because of the uncontrolled spread of the coronavirus is likely to place the country in a scrutiny watch by other agencies such as Moody's and Standard and Poor's, two organisations that carry huge sway with international investors.

Deserted roads are seen amid a lockdown due to the Covid-19 situation, in Kuala Lumpur on Jan 13, 2021. PHOTO: REUTERS

The darkening economic clouds for Malaysia will also have serious implications for the country's already troubled politics.

Opposition politicians are keen to point out that Malaysians are starting to focus on the government's failures in dealing with the pandemic amid questions about Mr Muhyiddin's move to seek a declaration of a state of emergency.

"People and businesses need … a blanket moratorium on loans and perhaps a targeted movement control order. Certainly not the emergency," said Mr Ronnie Liu Tian Khiew, a senior politician from the opposition Democratic Action Party and elected assemblyman to the Selangor state government.

Join ST's Telegram channel and get the latest breaking news delivered to you.