PUTRAJAYA’S stimulus package is merely a stop-gap measure to help Malaysians severely impacted by the pandemic to survive while ensuring that the economic momentum of the country is not at a standstill, said economists.

They said while the stimulus is necessary, it does not address the fact that the Covid-19 virus is now endemic and that the country may have to find a way to live with it rather than expecting life to return to pre-pandemic conditions.

“It (stimulus) is necessary given the duration and severity of the pandemic on businesses as well as household income and various livelihoods.

“It is, however, not deemed to be sufficient for businesses that are on the verge (of shutting down) or that are unable to sustain even with the aid,” said Yeah Kim Leng, professor of economics at Sunway University.

Prime Minister Muhyiddin Yassin yesterday announced the RM150 billion Pemulih economic aid package. Putrajaya has so far announced stimulus packages worth a total of RM380 billion since the start of the pandemic.

Key highlights of the Pemulih package are a six-month loan moratorium for all, a wage subsidy for employers, withdrawal of up to RM5,000 from the Employers’ Provident Fund under the i-Citra scheme, and additional aid to small and medium enterprises and those in the tourism, sports and creative arts sectors.

In the previously announced National Recovery Plan, Muhyiddin outlined four phases of reopening the economy which is dependent on three indicators: A reduction in the number of daily Covid-19 cases, an increase in the percentage of vaccinated individuals and the healthcare system must no longer be critical.

Yeah said given the economic uncertainty and an undefined timeframe as to when Phase 2 of the plan will take place, more businesses will shutter.

“The relief, wage subsidies and loan moratoriums are helpful but we have to prepare for an increase in business closures given the uncertainty and severity of the impact caused by the pandemic.

“For those who are retrenched, you will see an uptick in unemployment given that those sectors that are not allowed to operate will likely consider shaving staff. This will have an impact on the labour market,” Yeah said.

He added that if the lockdown is prolonged, the government may want to rethink its policies and implement more localised measures instead of a nationwide lockdown.

Malaysia was put in a lockdown on June 1. It will only be lifted when the number of daily cases goes down to less than 4,000. So far, Malaysia has been steadily reporting 5,000 cases a day.

Balancing short-term needs and adjusting to the new norm

Economist Lim Kim-Hwa from the Penang Institute said the government needs to find a balance between the short-term need of helping those in trouble while transitioning to accept that the Covid-19 virus is endemic.

“The virus is going to be endemic and not going away once you hit a vaccination percentage.

“The problem is not going to go away, but it’s more of how are you going to live with it and transition to accepting the virus is going to be in the community and how to mitigate on individual levels.

“Helping the workforce transition is a key part to economic recovery,” he said.

Lim said Malaysia’s public health issue has been compounded by a weak government as well as distrust in it, adding that as long as Perikatan Nasional is in power, it will continue to apply short term patches.

“If you compare how countries who have successfully controlled the pandemic and have not imposed such severe lockdowns, one of the big differences is the level of trust in the government.

“A weak government doesn’t have long term planning. You plan by the day because you don’t know if you’ll still be in the government (in the near future).”

Stimulus packages account for 27% of GDP

AmBank Research chief economist Anthony Dass said with the Pemulih package, Putrajaya has poured 27% of the country’s gross domestic product (GDP) into reviving the economy.

“This package accounts for 9.9% of GDP. With this package, the total stimulus announced from 2020 amounts to RM530 billion or 27% of GDP.

“These additional measures should help keep the economic momentum, allowing the country to grow between 4% and 4.5%,” he said.

Dass said while Malaysia’s exports rose in the months of April and May, the lockdown will have an impact for the months of June and July while prolonged lockdown may also see big companies moving their business base.

“The outlook for trade activities in the months of June and July will be impacted by the current lockdown that disrupted supply chains from the classification of essential and non-essential goods and services, and permitting export-oriented industries to operate at 60% capacity.

“The outlook post-July will depend on how well the Covid-19 pandemic is being managed, speed of the vaccination programme, how quickly the economy opens up and also on the standard operating procedure.

“Any delay in opening up will present risk of big boys moving their operations to parent companies or elsewhere as uncertainty increases. It may also dampen the foreign investors’ appetite here,” Dass said.

However, if everything goes according to the National Recovery Plan, Dass said Malaysia’s export activities will improve in the fourth quarter of the year.

“Our export projection for the full year is 15% from -1.4% in 2020.” – June 30, 2021.