Health Ministry director-general Datuk Dr Noor Hisham Abdullah.
SINCE Malaysia went into a movement control order (MCO) on March 18, one of the familiar faces on the news networks is the Health Ministry director-general Datuk Dr Noor Hisham Abdullah.
He was quoted as saying that the ministry is not taking any chances between the end of the first MCO period to mid-April and the ministry is hoping for the best but is prepared for the worst in the form of readiness for a significant increase in the number of cases. Readiness for the ministry involves not only in terms of the number of beds but also in terms of medical supplies and personnel, as well as geographical reach to cover the breadth and depth of the nation.
Similarly, whether it is for businesses, households or investors, we all need to be prepared for the worst and hope for the best. While the government has introduced its stimulus package, we all know it is insufficient for businesses or even the general public in particular, to withstand the financial and economic impact of Covid-19.
For businesses, the question that lingers on the owners is the impact of Covid-19 on their revenue and cost, measures to ensure they are able to meet their obligations, especially in relation to operating expenses like rentals, salaries and utilities.
What are the priorities for businesses now, one to three months ahead and for the longer term, the post Covid-19 period?
Do they have enough cash reserves to sustain themselves? What are potential remedial actions they could take to address the business revenue shortfall, cost containment and business volumes?
Are there strategies they could deploy to delay their payment obligations other than bank borrowings? Are they overstaffed now and whether retrenchment is an option to take now or later? Is the supply chain disrupted in anyway and whether there is a need to appoint alternative suppliers?
How has the end consumer market changed due to the MCO? What are their competitors doing? Does the business have current assets or other hard assets that can be monetise to generate cashflow to meet its short term needs or should it resort to bank borrowings to ensure it has sufficient cashflows to sustain itself during this period?
It is clear that there are many questions now for businesses and business owners need to think hard to overcome the challenges faced to ensure that the businesses survive this brutal period.
For individuals, it all depends on whether their income level is in any way impacted.
For salaried persons, most of them should be able survive this period provided they are not retrenched or have their salaries cut by their employers.
It is the freelancers, petty traders, single moms, daily wage earners that are most affected. Granted that most Malaysians do not save enough, even to survive this four-week MCO period is difficult for some. The government’s handout to the needy is welcome relief but again it depends how long can a family last without regular income.
Even if MCO is lifted, it will take a while for life to be back to normal and hence for some, their income will continue to be impacted. They would need some form of financial assistance and perhaps the NGOs or community engagements could help them to overcome this period.
With business and households being impacted, it is not a surprise that Malaysia’s GDP for 2020 will be under pressure.
Early this week, the World Bank too had revisited growth forecast and as assumed that Malaysia’s 2020 GDP will like contract by 0.1%, which is their baseline assumption, while their lower case assumption is for a contraction of 4.6% for this year.
Bank Negara has released their forecast too yesterday with a GDP estimate of between -2% and 0.5% for 2020.
This is in fact one of the widest GDP range that the central bank has provided for, effectively recognising the element of uncertainty. With the official Bank Negara forecast, it is likely that businesses too will adjust their expectations in terms of topline growth while analysts will be scrambling to lower earnings estimates.
With headline inflation now expected anywhere between -1.5% and 0.5%, there is likelihood that Malaysia too will experience deflation this year as well. Indeed, these are tough figures to digest but a recession and a period of deflation is recipe for further economic trouble ahead, especially if jobs are lost and unemployment rises.
Where do we go from here?
Similar to scenes in movies like “Armageddon”, “2012”, “Independence Day” and the most relevant movie to what we are facing today, “Contagion”, we too can learn some lessons from these movies.
First, of course is our reaction to a catastrophic danger that is upon us as we observe innocent lives are lost.
Second, once the danger is known and its impact to society, we learn to strategies our defence and planning to overcome the catastrophic event.
Lastly, which most movies do not show you as they rather focus on the “end of the apocalyptic” scenario, is how do we rebuilt the foundation that has been impacted by a catastrophic event.
In these movies, these events either originated from an asteroid/alien hitting the earth to cataclysmic event to a virus.
While all that are depicted in the movies is fictional, the Covid-19 pandemic the world is facing today is not.
It’s real. The script to this real-life movie is still being written as we speak and no one knows how it will end, when it will end or worst, will it ever end? While businesses and households take stock of the situation, investors too need to do the same.
How ready are investors to brace themselves for a potential worsening of the Covid-19 impact on companies’ earnings and outlook?
https://www.thestar.com.my/business/business-news/2020/04/04/hope-for-the-best-prepare-for-the-worst
