A TARGET-SPECIFIC economic package that includes a moratorium on loan repayment will be required even though the impact of the third movement-control order (MCO 3.0) may not be as severe as that of the previous lockdowns, said economists.

Research houses have projected that MCO 3.0, which begins today till June 7, may result in economic losses of RM300 million a day, compared with the whopping RM2.4 billion during the first MCO in March last year.

Since the start of the pandemic, Putrajaya has allocated RM340 billion through several economic aid packages.

Head of Research at the Malaysian Institute of Economic Research Dr Shankaran Nambiar told The Malaysian Insight that despite past aid, another stimulus package may be necessary. 

He, however, said the government must rethink its strategy on aid packages and tailor it to be on a targeted basis as it simply may not have the resources to continue supporting all sections of the economy.

“We have to be prepared for any eventuality. And it is very possible there could be a third or a fourth wave. The pandemic could be around for another year or two,” Nambiar said.

It is important for the government to narrow down the aid recipients from the stimulus packages.

“There are some industries that cannot survive a prolonged pandemic. Rather than (simply) supporting these industries, the packages will have to help people rebuild their lives,” he said.

“There has been a lot of emphasis on wage support, for instance. A strategy like this should be more carefully defined. The support should be given to industries that are more likely to pass through the pandemic than to those that will not,” he said.

Nambiar said more support should be given to industries that are “pandemic-proof”, the gig-economy sector and companies that are looking to cut down on low-skilled foreign labour, instead of a blanket wage subsidy.

“There is no point endlessly trying to support companies in the tourism industry. Instead there should be support for those in the industry who have lost their jobs and are trying to set up something else or support for tourism-related companies re-inventing themselves or moving into another area.

“The government may also have to consider cutting its losses but at the same time, it cannot allow the economy to collapse. It cannot allow a health crisis to morph into a financial crisis and that is why a moratorium on loans will be necessary,” he said.

Sunway University Business School Professor of Economics Dr Yeah Kim Leng also said a loan moratorium is an essential relief measure.

On whether the government’s fiscal capacity is in a conducive state for more relief measures, Yeah said the government still can afford to increase its debt spending by less than 1% of the gross domestic product.

“Alternatively, the government could look at redeploying budget allocations from lower priority areas,” he said.

As an immediate reaction to the announcement of the MCO 3.0 on Monday, several lawmakers and state reps urged the government to grant a moratorium on loan repayments.

Bank Negara Malaysia Governor Nor Shamsiah Mohd Yunus, however, said a blanket moratorium may not be the best solution for borrowers. They should, instead, turn to their respective banks to discuss alternatives to meet their debt obligations.

She said all banks have their payment assistance plans, including targeted loan moratoriums, which can be offered to borrowers who have lost their jobs or suffered a reduction in income.

Yeah added that although the impact of MCO 3.0 is expected to be less severe than the first lockdown, those who are already reeling from the economic downturn will experience prolonged pain as domestic activities are curtailed once again.

“The disproportionate impact on small and medium enterprises and low-income households, especially the self-employed and those linked to hard-hit sectors such as retail, hotels and restaurants, entertainment and tourism-related industries will be accentuated,” said Yeah, who is a former external member of Bank Negara’s Monetary Policy Committee.

“Although economic recovery remains on track as shown by the smaller GDP contraction of 0.5% in the first quarter (of 2021), the prolonged impact on vulnerable households and businesses in the hard-hit sectors would merit further mitigation measures to be undertaken by the government.”

The country will begin a four-week lockdown from today to curb the spread of the Covid-19 pandemic.

Prime Minister Muhyiddin Yassin announced that this decision was made after cases trended above 3,000 and 4,000 for a few weeks.

There will be restrictions against inter-district and interstate travel, social activities, sports and education.

The prime minister, however, said the economy will remain open, a move critics said would defeat the purpose of the MCO as resulting movements will eventually cause the virus to spread.

The 3,973 new infections against 2,848 recoveries reported yesterday pushed active cases up to 38,499.

Director-general of health Dr Noor Hisham Abdullah had told hospitals nationwide to brace for an upsurge in cases. – May 12, 2021.