PETALING JAYA: The country’s fifth round of economic stimulus, which has raised the total value allocated so far to RM305bil, is a welcome one that is both timely and targeted, say economists.
Dubbed “Kita Prihatin”, the RM10bil stimulus package comes at a time when the economic recovery is rather uneven across sectors, although most businesses have resumed operations.
The package, which was announced by Prime Minister Tan Sri Muhyiddin Yassin yesterday, comprises three main components – the extended Wage Subsidy Programme (WSP), as well as cash handouts to households via Bantuan Prihatin Nasional (BPN) 2.0 and micro enterprises via Geran Khas Prihatin (GKP).
Socio-Economic Research Centre executive director Lee Heng Guie said there remains a need for continued targeted fiscal aid even as the domestic economy sees positive signs of recovery.
The “Kita Prihatin” stimulus package is expected to further support the government’s efforts to revive the economy, complementing the record-low interest rates thanks to Bank Negara’s easing of monetary policy.
“The WSP, which will be extended for three more months, will provide more relief to employers, especially the smallish companies and those in the most-affected sectors such as tourism, ” Lee said.
For context, the application for the WSP was supposed to expire by end-September but has now been extended to Dec 31.
On the BPN 2.0 cash handout to the bottom 40% (B40) and middle 40% (M40) population segments, Lee believes it will help to support consumption at a time when the unemployment rate remains higher than pre-Covid-19 levels, despite some drop in the unemployment figures.
Lee said it was “highly likely” for the RM10bil to be financed through borrowings. “However, this is a secondary consideration. What matters is the need to revive the economy.
“More importantly, fiscal support measures must be reviewed periodically and will still be needed to support the sectors that will take a longer time to recover, and these include aviation and tourism, small businesses and vulnerable households and employees, ” he said.
Meanwhile, Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said the latest stimulus package will raise the country’s budget deficit levels.
However, under the current circumstances, he opined that the urgency is to stimulate the economy and provide assistance to those who have been severely affected by the coronavirus pandemic, rather than focusing on the deficit level.
“You can’t have it all, which is to reduce the budget gap and at the same time wanting to stimulate the economy at a time when Covid-19 has almost paralysed it, as reflected by the 17.1% contraction in the gross domestic product (GDP) during the June quarter, ” he told StarBiz.
Earlier in June, Finance Minister Tengku Datuk Seri Zafrul Aziz had said the federal government’s budget deficit could rise up to 5.8% to 6% of the GDP, due to the RM45bil direct government injection under the previous RM295bil Penjana and Prihatin stimulus packages.
During the Global Financial Crisis in 2008-2009, Malaysia’s budget deficit reached 6.7% of the GDP.
Commenting on the “Kita Prihatin” package, Mohd Afzanizam described it as “targeted and time bound”.
“I think the government is doing what it can to stimulate the economy within its own means.
“Recently, the debt ceiling has been raised from 55% of the GDP to 60%. So, the government is utilising its resources in the right way such as to give financial assistance to those who have really been affected by Covid-19, ” he said.
MIDF Research economist Mazlina Abdul Rahman also welcomed this round of stimulus by the government.
However, she thinks the positive impact would be “minimal”.
“For instance, the cash assistance which makes up the biggest chunk of the package worth almost RM7bil is just a one-off thing.
“Hence, it would not be adequate to boost consumption moving forward, especially with rising fears over the new wave of Covid-19 which could force consumers to hold back their spending plans on concerns over future personal finances and outlook for the job market.
“The labour market remains fragile, as retrenchments are still taking place as some companies may have to resort to this option to manage operating costs due to concerns over less-encouraging revenue ahead. This is because overall economic activities will take time to fully recover, ” she said.
Mazlina was also asked to comment on the requirement for the WSP 2.0.
To qualify, a business must have seen its revenue being reduced by at least 30% during the ongoing recovery movement control order (RMCO) compared to the same period last year.
In response to this, Mazlina said the 30% year-on-year revenue drop requirement was fair, as the government needs to be selective in providing aid to those who are really in need.
“Most businesses have resumed post-Covid-19 lockdown, and hence, their revenue should be improving gradually compared to previous months, ” she said.
During his “Kita Prihatin” package announcement yesterday, Muhyiddin said a wage subsidy of RM600 monthly will be given to a maximum of 200 employees each for three months under the WSP 2.0 initiative.
The applications are open from Oct 1 until Dec 31.
“For new applications that have never received assistance under the Wage Subsidy Scheme programme, they will be eligible for subsidies for up to six months, ” he said.
Muhyiddin also announced the GKP to help over 200,000 micro-businesses, with an allocation of almost RM600mil.
He said that the applications for the GKP from May 1 to 15 had benefited 545,000 small businesses around the country, with an allocation of RM1.63bil.
He added that to ensure more of these micro-businesses benefit from the GKP, the government has agreed to reopen applications from Oct 1 to 31.
Meanwhile, Muhyiddin added that a total of RM7bil in cash aid will be allocated for the BPN 2.0 initiative.
He pointed out that RM1,000 each would be given to 3.7 million families in the B40 category, RM500 each to 3.8 million singles in the B40 group, RM600 each to 1.4 million M40 families, and RM300 each to 1.7 million singles in the M40 group.
The payments would be made in two batches – one at the end of October this year and another in January next year.
The B40 families will receive RM700 each in October and RM300 each in January.
“Those who are eligible but have never received the BPN, the government will give a chance to appeal and make new applications.”
The Prime Minister said that the government had previously spent RM11.2bil on the first round of the BPN.