IN a strategic decision yesterday, Prime Minister, Datuk Seri Ismail Sabri bin Yaakob announced that Malaysia will transition into COVID-19 endemic stage from April 1. The country will also re-open its international borders at the same time, marking Malaysia as the first country in ASEAN to do so.
Fully-vaccinated visitors and Malaysian returnees are not required to undergo quarantine upon arrival though they must undergo a RT-PCR test two days before departure and a rapid test (RTK) upon arrival.
This is a welcome decision given that our international borders have been shut for almost two years since March 2020.
Border closure has also taken a toll on the services sector, specifically tourism-related and ancillary sub-sectors (eg retail, art and culture) given the sharp drop in international travellers which eased to 4.3 million tourists in 2020 from 26 million in 2019 (prior to pandemic).
Tourist expenditure in 2020 also halved or to RM40.4 bil from RM86.1 bil the year before.
More importantly, tourism is one of the largest industries in Malaysia, contributing almost 6% of the country’ gross domestic product (GDP) and employs close to a quarter of the Malaysian workforce.
Pockets of closure facing several sectors especially services have also contributed to the sharp rise in unemployment which reached a peak of 5.3% in May 2020 as a result of the pandemic.
Borders being shut were also a bane for key sectors such as agriculture and manufacturing which have been facing labour shortage issues.
The decision to re-open our international borders is lauded given Malaysia’s readiness to transition into COVID-19 endemic stage following almost 98% of the adult population being fully-vaccinated and more than half having completed their booster shots.
Mild effect
Though the daily COVID-19 cases are still elevated with a seven-day moving average of almost 30,000, 99% of the daily confirmed cases are either asymptomatic or experiencing mild to moderate illnesses, suggesting a relatively safe transition from pandemic to endemic stage for COVID-19.
Our encouraging COVID-19 vaccination rate also suggests that our healthcare system should not be overburdened with a high number of new cases, particularly into intensive care units (ICUs) thereby also easing strains on healthcare expenditure henceforth.
Note that the Government’s COVID-19 related expenditure reached RM38 bil and RM39 bil in 2020 and 2021 respectively though coming to an end in 2022 with a final allocation of RM23 bil. Total COVID-19 related expenditure is a not-too-small RM100 bil.
The end of COVID-19 expenditure could be a precursor for our fiscal debt ceiling to be reset lower to 55%-of-GDP from a temporary higher ceiling of 65%-to-GDP due to the pandemic.
Borders re-opening will also revive the tourism sector which has borne the brunt of the pandemic though the recovery will be gradual given that the ASEAN population is only expected to be fully vaccinated by 2023.
In the meantime, vaccination rate for the global population will only reach 70% by mid-year though booster shots may take some time to reach a comfortable level.
The strict requirement for returning Malaysians and visitors (eg, RT-PCR test and RTK test) could also be a deterrent given prohibitive costs for these tests, not to mention the still elevated level of daily cases.
Nonetheless, borders re-opening will address major issues like labour shortage for key sectors (manufacturing and plantation) which have been a major impediment for their full recovery.
The transition to endemic stage is also a cue for the Government to consolidate its fiscal condition. This will also be a driver to push the unemployment rate lower, currently targeted at 4% in 2022.
Given disruptions from the current Russia-Ukraine conflict, we are, however, cautious on the near-term outlook. Our 2022 GDP forecast of 6.1% (2021 GDP: 3.1%) remains unchanged.
Dr Rosnani Rasul is an economist at PublicInvest Research.
The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.
