SINCE the Covid-19 pandemic of 2020, the government has rolled out a total of six major and small economic stimulus and recovery packages totaling RM340bil or 24% of gross domestic product (GDP) to save lives and the economy under a prolonged period of varying degrees of movement restrictions and standard operating procedures (SOPs).
Malaysia is now entering the fifth gear – Revitalise – of the 6Rs (Resolve, Resilience, Restart, Recovery, Revitalise and Reform) economic recovery plan.
The RM20bil Strategic Programme to Empower the People and Economy (Pemerkasa) package, which contains 20 initiatives, marks the sixth package to revitalise and drive a sustainable economic and business recovery.
The latest package of financial aid is on top of the RM15bil Permai assistance package rolled out on Jan 18,2021 and the approved 2021 budget of RM322.5bil or 20.6% of GDP.
A crude tabulation shows that the government has put in RM357.5bil or 23.8% of the GDP this year to rejuvenate the economic recovery, which is higher than the RM305bil or 21.6% of the GDP in 2020 during the pandemic.
This is a big amount of money, and if it is spent effectively and accountably to achieve the intended outcome, that is “real” fundamental and quality as well as sustainable growth going into 2022. Pumping growth through cash handouts is not fiscally sustainable. The economy is recovering, albeit disproportionately and the healing process is still subject to risks. Recovery in several sectors continues to be choppy, with some segments witnessing growth while others lagging and remaining under stress, which is why the government has to tailor more specific support to maintain resilience and support growing areas.
For instance, in the tourism, entertainment and retail industry, sales are still 40%-50% below pre-pandemic levels.
Most of the respondents surveyed in The Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM)’s M-BECS (second-half 2020 and first-half 2021 and prospects for 2021) are cautiously hopeful about economic recovery in 2021. Only 23.0% of respondents are confident of economic recovery in 2021 (as opposed to the previous survey which had 84.9% of respondents expecting recovery to take place by 2021); with 38.7% having no confidence and 38.3% unsure of economic recovery.
We are still in an employment recession as the unemployment rate of 4.9% in January 2021 is still 1.6 pts above the average of 3.3% in 2019. The loss of employment as reported by the Employee Insurance System was still rising to 17,346 persons as of March 11,2021 or 43.2% of total employment loss in 2019 (40,084 persons); 107,024 in 2020). In this regard, the employment retention programme and hiring incentive as well as the wage subsidy programme will be extended.
The accelerated pace of inoculation holds the key to supporting the recovery and lifting sentiment, helping economic and business activities to return to normalcy.
The welcome news is that the vaccination programme has started in February 2021 with more than 300,000 people having received the first dose of the vaccine. The latest package will allocate an additional RM2bil for the National Immunisation Programme from RM3bil to RM5bil, to fast track the herd immunity target by end-December 2021 from the original timeline of February 2022.
Besides increased public awareness and education to reduce hesitancy and enhance intention to vaccinate, we believe that the engagement with the private healthcare to optimise effective vaccination services has the potential to help improve the programme and increase coverage as well as achieve the herd immunity target sooner.
The worst-hit tourism, entertainment and leisure industry will receive a slew of financial assistance initiatives and tax incentives, including one-off cash payments. Its revitalisation and vitality (direct and indirect contribution of 15.9% of GDP in 2019) is crucial to ensure a broadening recovery of the services sub-sectors.
The sustained revival of the tourism and leisure industry does not only depend on inbound travel but also the return of foreign travelers and tourists, which is restrained by strict SOPs, the inter-state ban and the closing of Malaysia’s international borders to foreign tourists.
Safe travel and accommodation as well as the health of staff for tourist and customer touchpoints will become a prerequisite for rebuilding trust and safety in any service-oriented business. Social distancing and new health regulations will compel restaurants and hoteliers to integrate as quickly as possible.
We hope that the government will expedite the “Travel Bubble” and “Green Lane” arrangement with China, Asean and countries in the Asia-Pacific region to help spur the recovery of the travel and aviation industry, as well as facilitate business investment.
Fuel subsidies on RON95 petrol and diesel are now in motion at RM0.30 per litre, costing RM3bil currently to stable fuel prices and keep cost fuel inflation at bay, given the increasing global crude oil prices.
Fuel subsidy remains a wild card as it will offset the windfall gain in oil revenue.
Various credit and loan facilities for micro business and SMEs have been given more funding, with more emphasis to accelerate digitalisation and automation in business transformation. It is a welcome relief that the interest rates charged on some of these funds will be lowered to 3.0% from 3.5%-5.0% to ease business funding costs and boost these funds’ utilisation.
The industry feedback is that the application and approval system can be made simpler and hassle-free to speed up loan disbursements.
Lee Heng Guie is the Socio-Economic Research Centre executive director. The views expressed here are the writer’s own.