KUALA LUMPUR: The government’s RM15 billion Permai assistance package announced yesterday will help to alleviate the impact of Covid-19 resurgence and latest Movement Control Order (MCO 2.0) restrictions on the first-quarter gross domestic product (GDP) growth while supporting the recovery from the second quarter onwards, economists said.
Sunway University Business School economist Prof Dr Yeah Kim Leng said the Permai assistance package is a welcomed relief, especially for low income households and affected businesses particularly the small and medium enterprises (SMEs).
Concurring with him was Datuk Michael Kang, president of the SME Association of Malaysia, who said the announcement is timely as the assistance could help sustain the businesses at least for a short term.
“The extension of the (loan) moratorium announced yesterday will be able to help the SMEs. At least, they have one thing less to worry about.
“However, we are worried if the MCO 2.0 will be extended as we are still having four-digit daily new cases,” he told Bernama when commenting on the government’s RM15 billion Malaysian Economic and Rakyat’s Protection Assistance Package (Permai).
Comprising 22 initiatives to combat Covid-19, the package is anchored on three goals, namely battling the pandemic, preserving the welfare of the people and supporting the continuity of business.
Among the assistance announced yesterday are that the targeted loan repayment moratorium and reduction of repayment instalments will continue to be offered by banks during the implementation of the MCO 2.0.
However, Kang expressed hope that all businesses could resume operations come Feb 1, while adhering to the standard operating procedures.
“If (MCO is) extended, we do need more assistance, especially for those who will lose their jobs and those whose businesses have collapsed,” he stressed.
“The assistance should be sufficient enough for the time being but the government should not extend (MCO) anymore after the end of the month,” he added.
Commenting on the nation’s unemployment, AmBank Group chief economist and head of research Dr Anthony Dass said the PERMAI aid package would certainly help address the issue.
He also believed that the assistance for natural disaster and government-linked investment companies and government-linked companies (GLCs) Disaster Relief Network has been announced promptly since it can impact the pandemic directly through disrupting health services and its infrastructure, as well as making social distancing more difficult among people displaced by a natural disaster.
The government allocates RM25 million under the network programme as a matching grant with GLCs for social initiatives, including provision of community assistance for the elderly, disabled, homeless, and flood victims.
“Once the economy recovers and gets on the right track, the (country’s) high debt need to be resolved and then we could start focusing on ratings,” he said, adding that the government and economists should not be overzealous on the ratings at this point of time.
Meanwhile, Yeah did not rule out the possibility of an increase in fiscal deficit and debt-to-GDP ratio by half a percentage point, although he said both debt metrics remained manageable but elevated.
Agreeing with this, Bank Islam Malaysia Bhd economist Adam Mohamed Rahim said the statutory debt limit could be raised again, possibly to 65 per cent.
“We think given the pandemic’s expected long-term economic scarring and the unprecedented fiscal measures necessary to mitigate the effects from the latest MCO, the statutory debt limit could be raised again, possibly to 65 per cent.
“And yes, Malaysia does have the room to increase to 65 per cent, following the expectation in the rise (in nation’s debt) with the latest stimulus measures announced today,” he told Bernama.
Adam also quoted the Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz who had projected the possibility of the government raising the debt ceiling to over 60 per cent of GDP beyond 2021.
During his announcement earlier, Prime Minister Tan Sri Muhyiddin Yassin gave the assurance that the impact of the MCO 2.0 on the economy is expected to be manageable and growth will continue to be supported by strong exports sector and the global trade recovery.
“We saw the impact of the MCO implementation on economic growth where the GDP in the second quarter of 2020 recorded a significant decline, with a significant rise in unemployment rate.
“Alhamdulillah, with the implementation of the economic stimulus packages, we managed to achieve a smaller GDP contraction rate, from 17.1 to 2.7 per cent, and a reduction in the unemployment rate from 5.1 to 4.7 per cent from the second to the third quarter of 2020,” he said when announcing the package today.
For the record, the government has implemented four economic stimulus packages since the virus outbreak in early 2020 worth RM305 billion, or more than 20 per cent of GDP to help the people and businesses, as well as protect the economy.
Dass projected the overall economy would improve to 70-80 per cent in the second quarter of 2021 with gradual easing of the restrictive measures compared with current operations at around 50-60 per cent in the first quarter of 2021 during MCO 2.0, and the economy is anticipated to operate as usual in the second half of this year.
“Reduction in domestic GDP would be between 0.6 per cent and 1.3 per cent in the first quarter, which means that 2021 GDP projection of 6.5 per cent growth will now be hovering at between 5.2 per cent and 5.9 per cent.
“Upside to growth still remains, (but this) depends on external and domestic (developments),” he said. – Bernama