KUALA LUMPUR, March 27 — Although the measures taken by the government are absolutely necessary to contain the Covid-19 outbreak, experts believe the administration must now dig into its coffers to mitigate the economical uncertainties and enrich the people to spend.
Among those expected to be badly hit by the 28-day movement control order (MCO) are those within the Bottom-40 (B40) to the Middle-40 (M40), and Small and Medium Enterprises (SMEs) group who would be strapped for cash after all nonessential services were paused.
Malay Mail spoke to several experts and economists who were all for the government taking a more pragmatic approach to keep its finances and the local economy afloat, indicating how cash hand-outs, possible bailouts, and purchasing high-return investments were among the immediately viable options.
For independent economy and political analyst Hoo Ke Ping, a Quantitative Easing (QE) policy is what he said the government should be considering, as this large-scale purchasing of assets would be able to add liquidity directly back into the economy.
Hoo felt this more aggressive stance if taken by the government, should be able to safeguard and subsequently jumpstart the national economy.
“QE simply means that the government will purchase mass assets that may be in the form of stocks or bonds, in which they directly inject much needed cash into private or government-owned firms.
“This will give those firms much needed liquid assets or cash to continue to operate and generate revenue. It is simply providing money back to these people and subsequently keeping their personnel employed,” he said.
Prime Minister Tan Sri Muhyiddin Yassin is expected to announce another stimulus package later today to soften the economical blow felt by the people and country following the MCO.
Malaysian Institute of Economic Research (MIER) called for an additional RM75 billion spending by the federal government on top of what has been previously announced.
Hoo, however, believes that the government would not be able to pull out the RM75 billion from their reserves without compromising on other liabilities, such as external debts repayment.
He said the government should inject cash into SMEs, allowing them to stand a chance and survive the outbreak without closing operations or being forced into retrenching employees.
Senior fellow of the Singapore Institute of International Affairs Oh Ei Sun agreed and said the government should also emulate the American and Australian governments in handing direct cash handouts to those within a certain income bracket.
“Similar to what the American and the Australian governments are doing, help SMEs pay their wages; deferment of tax and other public-related payments,” he told Malay Mail.
On the other hand, Universiti Malaya’s Prof Mohd Nazari Ismail felt many SMEs would eventually be stretched too far to be able to sustain, forcing them to shut down operations.
“For large firms, such as airlines and especially the GLCs, the government must try to help as much as possible because the consequence of them failing is too serious for the government to contemplate,” he said.
Universiti Teknologi Malaysia's (UTM) professor and geostrategist Azmi Hassan said what is to be announced today is crucial for these small businesses and the lower-income group, adding the six-month moratorium by banks and allowing withdrawal from the Employee Provident Fund (EPF) accounts was insufficient.
“On the economic side, it is going to be devastating for the four weeks of crippled business activities; loss of income for businesses and individuals are affecting us all,” he said.
He added it would mean good news if Muhyiddin tomorrow announces more direct cash-aid measures, which in turn would allow higher spending after the MCO ends and minimise the economical impact.
“The government not only needs to give aid to businesses but more importantly to give aid directly to individuals so that they have the cash to spend and directly will spur the economic ecosystem.
“I think the government needs to emulate the US government incentives on giving aid of US$1,200 (RM5,268) to households earning less than US$75k (RM329,250) per year,” said Azmi.
But until when?
Despite there being a clear period for the MCO, our experts were hesitant to even predict how long it would take for the economy to heal from the ripples of local and international measures taken to mitigate the Covid-19 outbreak.
“This is really hard to tell as we are an open economy and part of the global supply chain, and thereby affected by the pandemic elsewhere too,” said Oh.
Mohd Nazari had initially refused to put a quantum on how long he thinks the economy would take to recover, citing the overabundance of variables making it difficult to even make an educated assumption.
When asked if it could take one to two years for the economy to recover, he said: “Probably. But if sentiments are very positive, it could be earlier.”
“If banks and other lending institutions are not willing to practice debt forgiveness, then the recovery period will be longer,” he added.
Azmi said he felt the extended period of the MCO could cause the economy to perform sluggishly come the end of the MCO, drawing examples from the situation observed at the Covid-19 epicentre in Wuhan in the Hubei Province, China.
“It is going to take some time if the Wuhan or Hubei scenario is taken into account.
“The Chinese government already lifted partially on the lockdown but the residents were still very hesitant to venture out.
“The same will similarly happen in Malaysia if the government lifts the MCO on April 14; it's going to take some persuading for the people to venture out,” he added.