KUALA LUMPUR, May 28 — Economic observers think it will take more than just overcoming the Covid-19 threat in the country to restore consumer and investor confidence.
They predict that it will only see a resurgence if the government can roll out a sustainable post-Covid-19 economic plan to help businesses hit hard by the global pandemic.
Professor Yeah Kim Leng, who is a director of the Economic Studies Programme at the Jeffrey Cheah Institute on South-east Asia, told Malay Mail that it will require the “synergistic effect” of government, businesses and household spending to reinvigorate confidence in Malaysia’s economy.
“This (consumer and investor confidence) will likely happen when we are able to get on top of the virus. While there are still cases in the country, there is the potential of re-imposition of restrictions. That has a bearing on consumer confidence.
“The second factor is how fast companies can restore their balance sheet and improve their financial positions. The combination of government spending, businesses recovering and household confidence (in purchasing non-essential items) will create a synergistic effect.
“Otherwise, without all three major forces, spending will remain muted and if that remains muted, economic recovery will face a constraint,” said Yeah.
He elaborated that it is highly critical for the government to quickly roll out a spending plan that will help sustain private investor confidence, that the economic contraction in the second and third quarter is likely shallow and temporary.
On May 13, Bank Negara Malaysia announced that Malaysia’s growth rate for the first quarter of 2020 (1Q20) stood only at 0.7 per cent, the worst since 2009.
Should this trend continue into the second quarter of the year, Malaysia will technically enter into a recession.
Yeah also added that as long as businesses continue to hunker down, it will be difficult for consumer confidence to return.
Furthermore, the current economic uncertainty where businesses across multiple sectors had to shut down and let go of their staff, coupled with salary cuts across the board has forced many Malaysians to be cautious and tight-fisted with their spending.
The senior academic foresees positive growth occurring in the fourth quarter at the earliest or next year due to the collapse of external demand which will see a sharp decline in the export sector which cannot be offset by domestic demand.
Radical rethink of National Economic Model needed for post Covid-19 recovery
Agreeing with Professor Yeah’s assessment and prediction of a slow, positive growth only in Q4, Singapore Institute of International Affairs senior fellow Oh Ei Sun said Putrajaya needs to recalibrate its economic plans as soon as possible to put cold, hard cash into the pockets of everyday Malaysians.
He said that the current Bantuan Prihatin Nasional (BPN) stimulus package can only tide over the B40 income group for the next few months and then they will be left bereft of income again.
“In the longer term, absent a spiking recovery and therefore rapid job growth, there has to be a radical rethink of our national economic model, at least to the extent that it should enable people to be self-sufficient in their livelihoods,” said Oh.
He suggested that this would involve a more conducive environment with fewer red-tape for entrepreneurs and start-ups, revitalising Felda and Felcra with an emphasis on modern subsistence farming, niche farming in the rural areas and resurrecting the “one kampung, one product” policy among others.
This will allow those who have lost their jobs or youths entering the job market to find gainful work and create a few jobs for others with similar interests instead of just waiting for jobs to be created for them.
“New government stimulus measures should tailor to these needs such as targeted tax cuts, incentives and loans. Policies in land use and labour must also be reformed to suit these new, more flexible needs.
“Critical infrastructures such as telecom and information technology, transport and logistics must be further improved by the government and major industry players to truly enable electronic commerce and 'work from home.'
“Only then can people subsist more sustainably for the foreseeable future,” added Oh.
He also noted that Putrajaya’s eagerness to open some segments of the economy has led to a confusing conditional movement control order (CMCO). This shows the government was ill prepared and did not make good use of the movement control order (MCO) period to plan for various eventualities.
The analyst also pointed out the current stimulus package is also “sorely inadequate” to enable SMEs and M40s to sustain their businesses or make payments.
“For example, why should employers and not Socso which employers contribute to pay the medical costs if employees are infected with Covid-19 after businesses reopen?” asked Oh.
Some will save money, some will invest, others will struggle to survive
Touching on investment or spending opportunities in a bearish economy, both experts shared the same view that the only ones who will be able to take advantage of the situation will be the T20 group or the upper M40 class.
Yeah explained that while the B40 will most likely maintain their level of spending as they never had much to begin with, they will focus almost only on necessary items. He sees a rise in savings for many in the M40 and T20 income category as they will be wary of any lavish spending.
“After due diligence, T20 with excess cash typically snaps up properties and businesses which are on fire sale after disasters, and I think this round is no exception," said Oh.
“M40 will count themselves lucky if they can somehow survive this disastrous round, what more snap up properties."
Putrajaya’s Bantuan Prihatin Nasional (BPN) and EPF’s I-Lestari Programme
Looking at the severity that Covid-19 has on the Malaysian economy, the government has not been sitting on its laurels. It has rolled out several forms of financial assistance to help the domestic market sustain itself during these trying times under the Economic Care Stimulus Package.
Launched by Prime Minister Tan Sri Muhyiddin Yassin in March during the first phase of the MCO, the RM250 billion economic stimulus package has allocated nearly RM10 billion to assist B40 and M40 category households.
Those who are eligible under the BPN will receive: RM1,600 for households earning RM4,000 and below; RM1,000 for households earning RM4,001 – RM8,000; RM800 to single individuals 21 years and above earning RM2,000 and below; RM500 to single individuals 21 years and above earning RM2,001 to RM4,000; and RM200 per student in higher education.
Similarly, the Employees Provident Fund (EPF) has also dived in to ensure that the Malaysian public will have enough money to put food on their table through the I-Lestari Withdrawal programme to tide over the Covid-19 pandemic.
Its chief executive officer Tunku Alizakri Raja Muhammad Alias told an Awani talk show last month that the programme allows contributors to withdraw RM500 each month for a period of 12 months from their second account but also warned Malaysians not to abuse this form of financial aid.
“Before this we introduced a reduction in contribution down to four per cent from seven per cent, hoping that this will give extra cash to our contributors. Now, with I-Lestari we have had more than three million applications from our contributors under I-Lestari (in April).
“But I must remind everyone that EPF savings is for your future (retirement). We must maintain balance; we should not focus so much on today that we waste or jeopardise our future savings. I am confident this crisis will end.
“I am raising this issue because I am worried. EPF’s data shows that 71.4 per cent of those who are self-employed have less than one month’s worth of savings. Another concern is that 82.7 per cent of private sector workers have enough savings to last them only two months,” said Alizakri.
