Stimulus plan: Economists laud household and wage subsidies, hope for prudent rollout

Economists have lauded Prime Minister Muhyiddin Yassin’s economic stimulus package for its measures for households and jobs most affected by the Covid-19 pandemic.

They specifically praised the RM10 billion handouts for B40 and M40 families.

The experts also highlighted the RM5.9 billion wage subsidy programme.

Monash University Malaysia economics associate professor Poon Wai Ching said that both these measures are set to boost domestic consumption and create a multiplier effect for the economy.

“It is an excellent idea to ensure injections into the circular flow of the economy.

“These subsidies that are given directly to consumers and firms by the government will encourage consumption and production.

“These subsidies will be an injection of new spending (power) to the market and because of the multiplier effect, it will lead to a larger increase in the gross domestic product (GDP),” she told Malaysiakini.

Adding to that multiplier effect will be the one-off RM500 handouts to e-hailing drivers and civil servants, Poon added.

Economist Laurence Todd of think tank Ideas similarly said these two measures were a “step in the right direction” to protect the vulnerable.

“It is clear they (the government) have heard the concerns over the last few days and decided to seriously increase government spending on social protection,” he said.

Effective if executed well

Universiti Malaya economics professor Rajah Rasiah said he was “impressed” with the plan but cautioned that prudent execution was key.

“This is a huge turnaround - from a stingy financial prudence approach previously seen to a more crisis-solving set of injections that address a wider range of workers problems.

“A lot of governance will be essential to limit its leakage,” he said.

This was echoed by former Finance Minister II Johari Abdul Ghani.

“This stimulus, if executed well, can help to defend the economy, employment and protect the safety net of the rakyat during this difficult time,” he told Malaysiakini.

As part of the Prihatin Nasional Aid programme, four million households earning less than RM4,000 per month will get a one-off RM1,600 payment. The 1.1 million households earning between RM4,001-RM8,000 will receive RM1,000.

Three million single adults earning less than RM2,000 per month will receive RM800 while 400,000 single adults earning between RM2,001-RM4,000 will receive RM500.

All aid will be distributed in two tranches - once in April and one in May.

Under the wage subsidy programme, workers earning below RM4,000 will receive RM600 per month for three months.

This only applies to staff whose employers have experienced a more than 50 percent income loss since Jan 1, 2020. Employers will not be allowed to cut salaries, let workers go or put them on unpaid leave three months after the programme is implemented.

Muhyiddin touted that the entire stimulus package will cost a whopping RM250 billion.

Johari calculated that the government will need to fork out 8.8 percent or RM22 billion from its coffers.

“As far as direct money from government is concerned, it will be around RM22 billion covering the one-off payment to the rakyat for the Bantuan Prihatin Nasional (RM12 billion), wage subsidies (RM6 billion), civil servant aid (RM1.7 billion) and healthcare measures (RM2 billion),” he said.  - Mkini