PETALING JAYA: The government’s second economic stimulus package, which will be unveiled today, is expected to introduce more comprehensive measures to respond to the novel coronavirus (Covid-19) induced economic slowdown.
Speaking to StarBiz, economists said the new stimulus package is likely to inject more cash into the economy as compared to the RM20bil stimulus announced by former Prime Minister Tun Dr Mahathir Mohamad on Feb 27.
AmBank Group chief economist Anthony Dass said that the second stimulus package should cover a wider range of target groups and a broader range of economic activities.
“It must address six strategic issues: reducing unemployment and increasing job opportunities; easing the economic burden of the people, particularly those in vulnerable sections of society; supporting the private sector; undertaking capacity building for the future; supporting the small and medium enterprises; and supporting the informal business activities and those working in this sector, ” he said.
Among others, Dass recommended the government to provide incentives to companies that employ retrenched workers, exempt companies from foreign worker levy payments to the Human Resource Development Fund for a period of six months and provide direct financial assistance and incentive packages to the growing informal sector.
He also said that the government could also simplify the process for foreigners and foreign companies to buy commercial real estate valued at RM500,000 or more without seeking the approval of the Foreign Investment Committee.
The calls for a bigger stimulus package by the government have grown louder in recent days as the movement control order (MCO) is extended to April 14, to last for nearly a month after it was first enforced on March 18.
Pursuant to the first stimulus package on Feb 27, the government had introduced two rounds of additional measures on March 16 and 23.
All three rounds of stimulus injection, based on Maybank IB Research’s estimation, amount to RM61.51bil or 4% of the gross domestic product.
Alliance Bank chief economist Manokaran Mottain(pic below) urged the government to pay greater attention to the retail and logistics sectors in the second stimulus package.
“Within the retail and logistics sectors, the focus should mainly be on exporters who have been affected by the disruption in supply chain and falling demand.
“Manufacturing and construction sector may incur losses due to less production during this movement control order (MCO) period from March 18-April 14 without enough employees. The government can give one-off assistance to these sectors as well.
“Monetary assistance should also be given to the sectors that are affected by the MCO. Meanwhile, one-off cash assistance can be extended to tour agents, ” he said.
When asked whether the government could afford to introduce another round of massive stimulus package, Manokaran agreed that the government’s fiscal space is limited, particularly due to the recent crash in crude oil prices.
“However, we are counting on the cut of the allocation of petrol subsidies worth RM6bil during Budget 2020, and the possibility of re-implementation of goods and services tax at 4% which will provide the government additional tax revenue of RM3.8bil compared to estimated 2020 sales and service tax collection, ” he said.
Lau Zheng Zhou, the Institute for Democracy and Economic Affairs’ research manager for economics and business unit, cautioned that if there are not enough measures taken to support domestic demand, Malaysia’s private consumption could fall further and, in turn, create knock-on effects such as falling employment and business spending.
“This will then result in tax revenue losses and increased social assistance spending too.
“Apart from stimulus packages which are stop-gap measures to boost health system capacity and minimizing the impact from income losses, the government should reconsider its developmental spending in public infrastructure which takes longer to plan and generate impact while sowing the seeds for future growth when the economy recovers from this slowdown, ” stated Lau.
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