Malaysia's latest curbs to have limited impact on Singapore: economists


SINGAPORE may not be too greatly affected by Malaysia's state of emergency and its reintroduced Movement Control Order (MCO) curbs amid the Covid-19 pandemic, with the most significant impact likely to be on movement of manpower, said economists.

"Malaysia's state of emergency and MCO should only have a small negative impact on Singapore," said Maybank Kim Eng economist Chua Hak Bin. "The coverage of the MCO this time is narrower than in March last year, with more sectors deemed essential and exempted."

Economists agree that flows of goods were unlikely to be disrupted, and Dr Chua said he expects that "Singapore-Malaysia manufacturing supply chains and food trade should not be significantly impacted".

When Malaysia introduced an MCO last March, Singapore's government gave reassurances that supplies of food would not be disrupted, with both parties having reached an agreement over the continued movement of cargo.

Similarly this time, "assuming that the existing arrangements covering the flows of goods to and from Malaysia are not affected, then the impact on Singapore should not be significant," said CIMB Private Banking economist Song Seng Wun.

He sees the renewed lockdowns in Malaysia as part of a more general risk that Singapore faces: that multiple waves of infections in key trading partners, leading to travel restrictions and lockdowns, will "amplify the uneven recovery paths for many of our sectors and industries".

On Monday, Malaysia announced that a full MCO will be reinstated in five states and three federal territories from Wednesday till Jan 26, while a less-stringent conditional MCO will be reinstated in another six states.

The state of emergency, declared on Tuesday, is effective up till Aug 1, though it may be terminated early if the Covid-19 pandemic comes under control.

OCBC head of treasury research and strategy Selena Ling noted that there will be concerns about the potential impact on bilateral flows of workers and goods, but added: "For goods, hopefully the impact will be minimal since essential services are still operational - but we will have to wait and see."

For workers, there may be a slowdown in Malaysians coming to Singapore to work, she said.

Dr Chua similarly expects that the flow of goods and investment should not take a significant hit, though there could be disruptions to businesses and the flow of people.

As for the longer-term implications of a state of emergency, Ms Ling said: "At this juncture, the priority is to contain the domestic Covid-19 situation, so the policy attention is also unlikely to be focusing on external investment or trade decisions in the immediate future." She does not expect medium-term bilateral investments and trade to be adversely impacted.