Malaysia needs a post-Covid-19 stimulus package, says Lim

There is greater urgency for another round of economic stimulus package to prevent deflation including financial aid to SMEs

by DASHVEENJIT KAUR/ pic by MUHD AMIN NAHARUL

THE government needs to roll out a post-Covid-19 stimulus package to mitigate the impact of a recession and speed up economic recovery following the 17.1% contraction experienced in the second quarter this year (2Q20).

Former Finance Minister Lim Guan Eng (picture) said there is greater urgency for another round of economic stimulus package to prevent deflation including financial aid to small and medium enterprises (SMEs) and extending the loan moratorium by another six months when it expires on Sept 30, 2020.

“The worst GDP quarterly contraction in the history of 17.1 % requires another similar RM45 billion economic stimulus package to battle the Covid-19 economic recession.

“The government should implement another cycle of post-Covid-19 financial measures similar to the RM45 billion fund injection done earlier in April,” he said in a statement yesterday.

Lim said with two consecutive quarter-on-quarter declines, this confirms that Malaysia entered a technical recession in the first half of 2020 (1H20).

“Additionally, Malaysia’s GDP performance is the worst among middle and upper-income Asean countries that have reported their 2Q figures,” he said, adding that neighbouring countries such as Indonesia, the Philippines and Singapore all registered smaller declines.

The Opposition lawmaker further said the economic data shows the government has not been doing enough to mitigate the recession.

“Bank Negara Malaysia’s (BNM) data shows the government’s 2Q operating expenditure fell 2.1% from a year ago, compared to a 5.2% increase in the 1Q.

“If the government had done faster, we could have experienced a shallower recession,” he said.

Lim also stressed that the unemployment rate of 4.9% in June hides the fact that there are many professionals such as pilots doing jobs, or in other words becoming under-employed.

“Here, the government must realise that the quality of employment is just as important as the number of jobs.

“This says nothing of the pay cuts many hardworking Malaysians suffered over the past few months,” he added.

The Department of Statistics Malaysia revealed in April that 84% of private employees had suffered pay cuts.

BNM also reported that during the 2Q, private wages fell by 5.6% from a year ago after rising 2.1% in the 1Q20.

Failure to come up with another stimulus package, Lim believes it will cause greater hardship and even bankruptcy as many will struggle to serve their borrowings, either for cars, homes or business purposes.

Separately, the Federation of Malaysian Manufacturers (FMM) president Tan Sri Soh Thian Lai said business recovery may take anything between four months to two years depending on the sectors and impact that Covid-19 has had on the business.

“The manufacturing sector continues to take on a very pessimistic stance in their projections on the prospects of their businesses for the rest of 2020.

“For most companies, overall business activities including sales for both domestic and exports for the next six months is still expected to be low as they continue with their business revival and recovery,” he said in a statement.

Soh added Covid-19 and the subsequent MCOs had rendered manufacturers to be inoperable, some for a few months depending on their type of business activity, resulting in substantial drops in revenue, financial losses and severe trade challenges including disruptions to supply chains which had in turn impacted business sustainability, employment and productivity.

“Supply chains continue to be impacted with delays in deliveries from suppliers and with shippers experiencing an increase in logistic and shipping costs, increase in raw material prices as well as shortages in supply.

“It is also anticipated that when the automatic loan moratorium period and the six-month wage subsidy period end in September 2020 for most companies, businesses will be faced with a double cost whammy which could severely impact their initiatives to revive their businesses,” he added.

To ensure that the economy can quickly recover and businesses continue to improve their revenue and sustain their workforce, Soh said FMM calls on the government to continue supporting industries with more initiatives and assistance, especially the extension of the moratorium on banking facilities and timely execution of the Temporary Measures for Reducing the Impact of Coronavirus Disease 2019 (Covid-19) Bill 2020.