PUTRAJAYA’S second stimulus package is bold enough to cushion an economy by the coronavirus, said economists, and at the same time, not blow the government’s coffers.

The stimulus will help firms, many of whom have scaled down operations, to maintain their cash flow and retain workers so as to weather an impending recession.

Low-, middle-income households and daily wage earners, meanwhile will get critical cash aid to tide them over during the extended movement control order.

Cash transfers and deferring rent payments for public housing, will also help these households spend and boost overall consumption, which will support the economy.

“The second economic stimulus package is bolder as the government acts decisively to provide a timely and much needed financial assistance to households as well as businesses,” said economist Lee Heng Guie of the Socio-Economic Research Centre (SERC).

“It will help the corporate sector and SMEs manage cash flow challenges and provide financial guarantees.

“During these turbulent times, businesses need back up to keep on running while vulnerable groups need the most help,” said Lee.

Prime Minister Muhyiddin Yassin yesterday announced a RM250 billion economic stimulus package to mitigate the effects of the Covid-19 pandemic.

Saying that “no one will be left behind”, Muhyiddin said of the RM250 billion, RM128 billion will be spent on welfare while another RM100 billion has been earmarked for businesses, including small and medium enterprises (SMEs).

Dr Shankaran Nambiar of the Malaysian Institute of Economic Research (MIER) said the stimulus provides short-term support for disadvantaged groups and the economy.

“It seems the aim is to get money into the pockets of people so that they can go ahead with their lives. It will give a boost to consumer expenditure,” said Nambiar, a senior research fellow at MIER.

RM25 billion has been allocated for direct cash handouts for working and middle class Malaysian households, students, rent exemptions for public housing, and discounts on electricity bills.

RM5.9 billion was also allocated for a wage subsidy programme where the government will provide a subsidy of RM600 per month for three months for workers who earn below RM4,000.

“The wage subsidy is certainly a welcome relief, although the scheme can be further enhanced to save jobs and preserve employee incomes,” said SERC’s Lee.

These allocations are on top of the RM100 billion in moratoriums for bank loan repayments and credit card installments for the next few months to help firms deal with the loss in business as a result of the pandemic.

Dr Yeah Kim Leng of Sunway University said RM50 billion in government guarantees through Danajamin had also been provided for bank loans to companies.

“This is a financial lifeline that all companies can use to tide them over the slowdown in economic activity that comes with fighting the pandemic,” said Yeah, a professor of economics at Sunway University’s Business School.

The ability for those below 55 years of age to withdraw their savings to pay for daily necessities is also expected to cost RM40 billion.

“So the additional price tag is actually only RM25 billion and this is expected to widen the fiscal deficit to about 4% from 3.4%,” said Yeah.

The amount is within the government’s capacity to spend as global ratings agencies, which influence investor confidence in a country, would consider it a one-off, emergency allocation, said Yeah.

Lee said rating agencies are expected to allow Putrajaya to temporarily stray from its aims of balancing the national budget.

“But Putrajaya must remain committed to reduce its deficit and contain the debt when the economy recovers.

“The government needs to rebuild fiscal space as having fiscal space is like having money in the bank. It provides us the fiscal flexibility during a rainy day.” – March 28, 2020.