IN all likelihood, the impending movement control order (MCO 2.0) which will come to force after midnight tonight (Jan 13) – initially for a two-week period – is likely to stretch beyond that duration given the Government has declared a state of emergency until Aug 1.
This is not surprising as the previous lockdown which was imposed on March 18 last year lasted close to a quarter in 2Q 2020 and was implemented after a far milder outbreak than the current third wave, according to Fitch Solutions Country Risk & Industry Research.
“Malaysia’s daily case load has averaged about 2,319 since the beginning of the year and set a new record of 3,027 on January 8,” observed the research house in a commentary entitled 2021 Malaysia Growth, Monetary and Fiscal Outlooks Likely Derailed.
“This compares to the average of 149 and peak of 217 in the month between mid-March and mid-April 2020, the last serious episode of the outbreak in the country.”
Fitch Solutions noted that the re-imposition of lockdown measures is in line with its view since early November 2020 when it cited the possibility of a wider lockdown as a downside risk to its interest rate view in 2021.
“We will be re-visiting our rate forecast of 2.25%, a 50 basis points (bps) hike from the current 1.75% in the coming weeks – the weaker economic performance and fiscal constraints means monetary policy will likely have to remain loose for longer to support the economy,” the research house pointed out.
Touching on the state of emergency, Fitch Solutions said it presents mixed prospects in which the research house will observe how the government exercises its emergency powers over the coming weeks before considering any changes to its short-term political risk index score which currently stands at 66.7 out of a best possible score of 100.
“While the Government’s ability to pass laws without the consent of Parliament is a plus for policymaking over that period, the lack of parliamentary oversight is liable to result in an erosion of the Government’s already thin legitimacy, having come to power in a backroom coup in 1Q 2020,” justified Fitch Solutions.
“Indeed, the risks are especially pronounced if the Government takes the opportunity to push through unpopular legislation that would otherwise not have been passed by Parliament.”
After all, segments of the population could also question the need for a state of emergency, especially after the previous attempt to declare one in October 2020 was rejected by the King, according to the research house.
“(This) could be perceived as a tactic to evade questions around the thin majority Prime Minister Tan Sri Muhyiddin Yassin’s Government has in Parliament, added the research house,” it added. – Jan 12, 2020
