COMMENT | In December last year we presented our scenario analysis for 2021 in which we predicted a “survival trap” period where consumers, firms and the government ran down their reserves, followed by a “tipping point,” around now where the economy faced a 50 percent chance of a weak recovery or a 30 percent chance of a mild recession.

Our recent update based on new economic data and the impact of various lockdowns suggests that a recessionary scenario is more likely at around 35 percent. We have also raised the likelihood of a weak recovery to 55 percent. The strong rebound hoped for by the government is all but gone with only a 5 percent chance and we put the same odds on a full-scale slump.

Our general scenarios are shared by many independent organisations. On June 8, the SME Association of Malaysia said there had been 100,000 small-business closures and 50,000 more to come. The following day, the Malaysian Employers Federation warned that many firms have zero cash flow.

Even in government circles the warning signs are clear. A survey by the Entrepreneur Development and Cooperatives Ministry (Medac) published on June 4 said that more than 90 percent of micro, small and medium enterprises risked closure, with 54 percent saying they could only survive three to six months and 72 percent expecting to suffer losses.

The following day...