KUALA LUMPUR: The Covid-19 pandemic and tightening restrictions under the National Recovery Plan could see an increasing chance for Bank Negara Malaysia to cut the overnight policy rate by 25 basis points at its July 8 meeting.
Wellian Wiranto, economist, global treasury – research & strategy at OCBC Bank said on Friday in the previous monetary policy committee (MPC) meeting, the central bank had projected a sanguine outlook because any lockdown had left business activities largely unfettered.
“With one tighter set of restrictions now being piled on top of already tightened measures, that assumption is sadly looking less tenable by the day, ” he said.
He said it has been more than a month since Malaysia enacted its phase one restrictions, which saw a curtailment of most business activities across the country.
While the move saw initial success in curbing the pandemic spread, the case count is – yet again – showing signs of rapid uptick in recent days.
Selangor is reportedly where the virus has been spreading most stubbornly, accounting for a third of the national tally in recent days.
As a result, the government had tightened the measures even further for much of Selangor and KL.
“Starting from tomorrow until July 16, under the so-called enhanced MCO measures, residents will face home curfews, with only one household member allowed to venture out for essential purchases.
“Notably, factories are ordered to shut as well, unless they are producing food and medical items. This is a marked change from the previous measure which allows the electronics manufacturers to remain operational, offering some relief to the economy.
“Even though workplace clusters contribute just a quarter of cases at the national level, they comprise as much as 80% of the cases in Selangor – prompting the necessary tightening of the restrictions, ” Wellian said.
These areas make up 40% of national GDP and with even more curtailed business activities, he said this is not a good development from the economic viewpoint.
“Moreover, it is also a signal that the country as a whole might have to wait a while longer to see any easing of restrictions.
“Already, the PM had to postpone the original reopening date from June 28 due to the still-high daily counts, without offering any firm new timeline.
“Even though the idea of mid-July reopening was floated by some officials, that maybe looking less likely now. In the meantime, the economic hits might be felt more acutely, even if the latest stimulus helps in some ways, ” Wellian added.