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Senior Economist Julia Goh and Economist Loke Siew Ting at UOB Group assessed the recently announced restrictions to contain the spread of the coronavirus.

Key Quotes

“The government announced a national state of emergency and more stringent measures to contain the COVID-19 pandemic as the rise in confirmed infections since mid-October has showed no signs of abating. The reinstatement of the Movement Control Order (MCO) for two weeks will see much tighter restrictions on social and work mobility across six states namely Selangor, Federal Territories (Kuala Lumpur, Putrajaya, and Labour), Johor, Penang, Melaka, and Sabah. The areas affected by the tighter MCO contribute 66.3% to the country’s GDP.”

“The national state of emergency will last until 1 Aug. This is not a military coup and a civilian government remains. There is also no curfew imposed and economic activity continues during the emergency period. The proclamation of emergency is mainly to ensure that no major political events including elections can be conducted in this period. Thus, the focus will be on containing the pandemic and implementing policies to sustain the economic recovery.”

“The latest measures are expected to shave ~1.0% pts off 2021’s full-year GDP growth with estimated economic losses of about MYR12bn… We cut our 2021 GDP growth forecast to 5.0% (from 6.0% previously). We pencil in a 25bps policy rate cut to 1.50%, a new low, at the coming monetary policy meeting on 19-20 Jan.”