Malaysia’s Lockdown May Further Hurt Singapore Economy

Singapore’s Prime Minister Lee Hsien Loong assured residents of the city-state that goods and food supplies from neighboring Malaysia will continue despite that country’s two-week lockdown due to the coronavirus outbreak.

Lee said he received this guarantee from Malaysian Prime Minister Muhyiddin Yassin on Tuesday by phone.

"I told him that I understood the reasons why he had made this move and wished Malaysia success in containing the outbreak. I was happy to hear his reassurance that the flow of goods and cargo between Singapore and Malaysia, including food supplies, would continue," Lee said.

On Monday night Malaysia closed its borders and ordered citizens to refrain from going overseas, or to Singapore, through Mar. 31, in a response to a spike in confirmed virus cases.

Tourists will be prohibited from entering Malaysia over that period. Malaysians returning from foreign countries will be required to face a health examination and self-quarantine for 14 days.

Tens of thousands of Malaysians living in the southern state of Johor travel daily to work in Singapore, in businesses from restaurants to semiconductor manufacturing.

"This will prevent them from commuting daily, at least for the time being. We are therefore working out arrangements with our companies to help these Malaysian workers stay in Singapore temporarily, if they would like to do so," Lee said.

“The government is looking into providing financial support for companies that need to urgently accommodate their affected workers,” said Singapore’s Ministry of Manpower. “We will prioritize the needs of firms that provide essential services such as healthcare, security, cleaning, waste management, facilities management, logistics and transport.”

Singapore imports more than 90% of its food supplies from Malaysia, particularly fruits and vegetables.

Muhyiddin also ordered the closure of all religious institutions, schools, businesses and government offices until March 31. Malaysia also banned mass gatherings and will only permit essential services like supermarkets, banks, gas stations and pharmacies to stay open.

Lee also said that Singapore and Malaysia will appoint senior ministers from both countries to coordinate their strategies on how to stem the coronavirus outbreak.

"They are already in touch, but it may take a couple of days for arrangements to be worked out and to settle down," Lee said. "We need not worry as we have prepared for such an eventuality and have plans in place to cope. Glad that Singaporeans are calm, united and resilient as we solve the problems at hand."

Malaysia now has 553 virus cases, the highest total in Southeast Asia. Many of the new infections were linked to a recent religious gathering of 16,000 people at a mosque in a Kuala Lumpur suburb.

“We cannot wait until the situation deteriorates. Drastic moves are needed immediately to restrict public movement and curb the spread of the virus,” Muhyiddin said.

Earlier, Muhyiddin unveiled a series of financial measures to help people in Malaysia cope, including cash payments for about 33,000 workers on unpaid leave, discounts on electrical bills for six months and cash handouts to low-income families. The Malaysia government earlier introduced a 20 billion ringgit ($4.7 billion) stimulus program to support the economy.

As for Singapore, Malaysia’s lockdown is likely to hurt an economy already reeling from effects of the virus.

Maybank Kim Eng Research estimated that about 400,000 Malaysians who work or study in Singapore cross the border every day.

“Banning daily commuters will essentially cut off almost a [tenth] of Singapore’s labor force, hurting both the manufacturing and services industries,” said Chua Hak Bin, a senior economist at Maybank in Singapore.

Maybank estimated that the absence of Malaysian workers will shrink Singapore’s economy by 0.3% in 2020. In the event Malaysia’s lockdown is extended, the hit on Singapore’s gross domestic product will be worse.

“Malaysia and Singapore remain joined at the hip by geography and history,” Chua said. “Malaysia’s lockdown, especially on travel and nonessential business, could have severe knock-on effects on Singapore’s economy.”

Selena Ling, head of research and strategy at Oversea-Chinese Banking Corp. in Singapore, is predicting a 0.9% year-over-year drop for Singapore’s first-quarter GDP. “But the risk is that it drags into the second quarter as well,” she added.