World Bank: Malaysia should continue income relief

Ongoing need to provide support to households via cash assistance transfers until economic growth, job creation and wage growth resume

by NUR HANANI AZMAN / Pic by MUHD AMIN NAHARUL

THE government should continue its existing income-relief measures to target groups for at least another six months to maintain financial support for the poor and vulnerable group in the near term, said the World Bank Group.

Senior economist on poverty and equity Dr Ririn Salwa Purnamasari said there is an ongoing need to provide support to a broad range of households, particularly low-income and vulnerable households, through cash assistance transfers at least until economic growth, job creation and wage growth resume.

She stressed that this cash assistance can be focused more narrowly on the chronically poor, while targeted wages subsidies must be introduced, including for youth and women who traditionally suffer from difficulties in entering the labour market.

“As the economy and employment recover, resources could be directed to those who may continue to need support to obtain a job and who may not benefit from the existing wage subsidy programme.

“Pilot and social insurance evaluation measures also need to be carried out, whereby Malaysia could learn from the experiences of other countries on pilot initiatives to increase the coverage and adequacy of social insurance programmes among informally employed workers,” she said at the launch of Malaysia Economic Monitor December 2021 Edition “Staying Afloat” yesterday.

On the education system, Ririn Salwa said within Malaysia’s education space, measures are required to improve learning processes, especially for socio-economically disadvantaged children.

She said with prolonged school closures, it is likely that disparities between the socio-economically advantaged and disadvantaged households have widened the existing learning gaps.

Hence, Ririn Salwa suggested the government could conduct an assessment of the pandemic-related learning loss to determine the specific needs of students as they re-engage in face-to-face learning.

“For a long-term focus, the government must improve the targeting and adequacy of Malaysia’s cash transfer systems to provide better coverage and protection.

“This can involve outreach programmes and leveraging existing registries for cash transfer programmes that focus on the most vulnerable, such as those implemented by the Department of Social Welfare,” she added.

Economic recovery in Malaysia is expected to gain momentum in 2022 with the World Bank projecting the economy to grow by 5.8%, mainly driven by an acceleration in private consumption.

The Washington, DC-based institution said exports are projected to continue to expand, albeit at a slower pace, in line with the expected moderation in global trade growth and anticipation that it is to be broad-based with recovery across all economic sectors.

The World Bank noted that limited fiscal space remains a key challenge whereby the federal government’s revenue, which has been declining since 2013, is projected to reach 14.3% of GDP in 2022.

Meanwhile, World Bank country director for Brunei, Malaysia, the Philippines and Thailand Ndiame Diop said in the short

term, it is essential that policy measures are geared towards maintaining financial support for the poor and the vulnerable, ensuring greater inclusivity with social insurance and mitigating further learning losses.

“Over the long run, Malaysia should take steps to reform its social protection system, making it more broad-based, robust and progressively targeted.

“Of course, given the significant disruption to learning that we have experienced during the pandemic, emphasis should also be given to strengthening the education system, so that it will be able to respond to future shocks and minimise possible learning losses,” he said in his welcome remarks yesterday.

Noting the Malaysian government’s intention to introduce a Fiscal Responsibility Act in 2022, the World Bank said it could pave the way for medium-term fiscal consolidation.

“However, in the short term, improving the targeting of social spending and at the same time phasing out generalised and regressive subsidies, such as fuel subsidies, will help raise the efficiency of government spending.

“Targeted social spending should remain a short-term priority due to the high degree of uncertainty over the health and economic outlook moving into 2022,” the report said.