Forced into a two-week lockdown which Prime Minister Muhyiddin Yassin had just days earlier said would be catastrophic for the economy, Malaysia's hopes of a swift return to pre-pandemic GDP levels this year have evaporated.
The head of its Covid-19 response has also put paid to any notion of a swift exit from the shutdown, warning that it could be the final quarter of the year before a rampant surge in infections is under control.
Most analysts have lowered their growth projections to below the official 6 per cent to 7.5 per cent forecast, with even state-linked Affin Hwang Investment reducing its estimate by a whopping 2 percentage points to 4 per cent.
Despite 17 economic sectors being allowed to operate with 60 per cent staff during phase one of the lockdown, the investment house said in a report yesterday that it estimated daily losses to be up to RM2 billion (S$641 million).
A looser four-week phase two would ensue if case numbers drop, before a phase three similar to last month's soft-touch movement control order (MCO) returns.
But Director-General of Health Noor Hisham Abdullah said on Sunday that with aggressive new variants spreading across the country, a "strategy of combining public health measures and increasing vaccination rates... may be able to flatten the curve in three to four months".
Finance Minister Tengku Zafrul Tengku Abdul Aziz said yesterday that there would be a downward revision of the gross domestic product, but "it is still relatively early so we are calculating the impact" of the lockdown and much would depend on the "success of the vaccination programme".
"That's our exit strategy. We are putting as much of our resources as possible to get as high a number of people vaccinated in the next couple of months," he told reporters, adding that densely populated economic centres such as the Klang Valley should reach herd immunity by October.
But Malaysia has fully vaccinated only 3.5 per cent of its population against Covid-19 so far, and has yet to average even half of the 250,000 doses it must administer daily to hit its 80 per cent inoculation target.
The premier had said on May 23 that the government was avoiding a lockdown to avert economic collapse. But his hand was forced after three weeks of the MCO - barring inter-district travel and social activities but leaving economic sectors largely untouched - failed to suppress Malaysia's worst coronavirus wave. Death and infection numbers kept rising to new records.
In May alone, more than 1,200 people succumbed to the disease, nearly half the total since the pandemic began, while more than 160,000 were infected, which is 29 per cent of cases to date.
When the first MCO was imposed in March last year, strict stay-home directives saw GDP bleed RM2.4 billion a day, and the government eventually spent RM55 billion across the year to ease the fallout. Malaysia's economy shrank 5.6 per cent last year - its worst decline since the 1998 Asian financial crisis.
But while unveiling a RM40 billion aid package on Monday night, hours before the lockdown took effect, Tan Sri Muhyiddin admitted that "the government has limited fiscal space to spend at this moment" which resulted in the "Pemerkasa Plus" involving a meagre RM5 billion of actual spending from state coffers.
Barclays regional economist Brian Tan noted the "very limited fiscal injection... amounts to less than half of the previous RM11 billion... announced in March to support the economic recovery following MCO 2.0".
Key initiatives in Pemerkasa Plus may not last long enough to help smaller firms and Malaysia's poorest weather the storm.
The RM1.5 billion in wage subsidies will benefit an estimated 2.5 million workers for a month, while RM2.1 billion in cash handouts range from RM500 to each of the poorest families, to just RM100 for each household with a monthly income between RM2,501 and RM5,000.
Small and medium-sized enterprises (SMEs) and the poorest 40 per cent of the population can choose between a three-month loan moratorium, or reducing instalments by half for six months.
SME Association president Michale Kang had previously said four in 10 members had planned to cut jobs or suspend operations without loan moratoriums and subsidies for wages and rent.
Malaysians have already flooded social media with accounts of forced unpaid leave or salary cuts, with some pointing out they have yet to find new jobs after being fired or closing their businesses last year.
But Socio-Economic Research Centre chief Lee Heng Guie believes the impact of the lockdown will not be so severe - potentially up to 0.7 per cent of GDP - as booming industries such as export-focused manufacturing and retail are still allowed to operate.
"Business enterprises have accumulated RM24.1 billion during the period between February 2020 and March 2021 for their cash flow needs. Many soft loans, funds and credit facilities established last year for SMEs and businesses are not fully utilised and would continue this year," he told The Straits Times, adding that financial institutions have also rolled out targeted assistance to debtors.