PETALING JAYA: The latest fiscal injection in the form of the RM10 billion Kita Prihatin stimulus package unveiled by Prime Minister Tan Sri Muhyidin Yassin is seen as an insurance to shore up domestic demand in the final quarter of 2020, according to Sunway University Business School professor of economics Dr Yeah Kim Leng.
“The latest initiative will help ease the economic hardships of low- and medium- income households and SMEs while extending the assistance to those that have fallen through the net,” he told SunBiz.
As the latest stimulus offers cash assistance and increased income support for the bottom 40 households (B40) as well as those in the middle 40 households (M40), Yeah pointed out that the extended wage subsidy programme will be helpful for SMEs to cope with the extended recovery movement control order.
“Importantly, eligible households and businesses that missed receiving assistance in the previous four stimulus packages can now benefit from the latest initiative,” he said.
On the whole, the professor sees the measure as a tailwind to the recovery momentum commencing in the third quarter, after the sharp gross domestic product (GDP) contraction of 17.1% seen in the second quarter.
The latest round of stimulus consists of Bantuan Prihatin 2.0 cash transfers worth RM7 billion comprising payments in two tranches to eligible B40 and M40 recipients, as well as a RM2.4 billion Wage Subsidy Programme 2.0 for companies that continue to register more than a 30% decline in revenue year on year since the RMCO at a rate of RM600 per month for up to 200 employees per company.
In addition, the stimulus allocated RM600 million for a one-off payment of RM3,000 for 200,000 registered micro-entrepreneurs under the Special Prihatin Grant 2.0.
MIDF Research’s economist, Mazlina Abdul Rahman, opined that the additional stimulus package will exert further positive impact on the economy on top of previous packages.
She said the measure is made possible by the approval granted by Parliament to raise the federal government’s statutory debt ceiling from 55% to 60% of GDP, which allowed for a greater flexibility to inject additional fiscal stimulus like Kita Perhatin.
“However, the government needs to carefully utilise the additional space to ensure sufficient funds in the event of worsening economic conditions following new waves of Covid-19,” said Mazlina.
She argued that the overall positive impact on the economy will be minimal, as the one-off cash assistance, which takes up the lion’s share of the package at close to RM7 billion, will not be adequate to boost consumption, particularly against a backdrop of rising fears over a new wave of Covid-19, which could coerce consumers to rein in their spending plans due to concerns over future personal finances and outlook for the job market.
She pointed out that the labour market remained fragile as retrenchment is still taking place, with some companies resorting to layoffs to manage operating costs due to less-than-encouraging revenue as overall economic activities will take time to fully recover.
