Kita Prihatin prevents greater economic slowdown, say economists

 

Abu Sofian Yaacob says Kita Prihatin provides helpful short-term relief for families in need while creating economic activities with the money spent going back to the economy.

PETALING JAYA: Economists say the Perikatan Nasional (PN) government’s Kita Prihatin package has prevented a greater economic slowdown from taking place, particularly in terms of demand and spending.

Universiti Malaya’s Mohd Nazari Ismail said the Bantuan Prihatin Nasional cash aid, coupled with the bank loan moratorium, has been crucial in alleviating the impact of the economic downturn, adding that these, however, were key short-term measures.

He said the special RM3,000 grant for micro, small and medium-sized enterprises (SME) as well as the Wage Subsidy Programme prevented firms from going under due to a reduction in revenue.

“Therefore, they can continue to operate even though the economy has slowed down. Without this assistance, there would be a drastic slowdown in the economy and lots of bankruptcies,” he told FMT.

Mohd Nazari Ismail.

Nazari said the loan moratorium should be extended to all parties facing real financial trouble, adding that the interest accrued on all loans should be completely written off.

“Only the principal amount owed to the banks should be collected, and that should be collected only from parties that can really afford to pay. Others who are still in financial trouble should be granted the extended moratorium,” he said.

However, Nazari warned that these short-term measures would lead to an increase in government debt which could turn out to become long-term problems for the government.

As a solution, he said the PN government will need to increase the tax rates to service these debts which would in turn impact the economy in the future.

Abu Sofian Yaacob.

Universiti Putra Malaysia’s Abu Sofian Yaacob said the Kita Prihatin aid provided helpful short-term relief for families in need while creating economic activities with the money spent going back to the economy.

“It’s good for business and good for the government too, because the government can earn through taxes. It will help keep business afloat and the government can tax the profits of businesses. So, it has a positive impact overall,” he said.

He told FMT that the RM3,000 special Prihatin grant for micro SMEs would enable business owners to improve their trade, adding that petty traders could even upgrade simple items such as utensils or furniture.

However, he said there might be a perception of bureaucracy that would deter certain owners from applying for the grant, an area Putrajaya could address.

“I hope these businesses will use the money wisely because sometimes they might plan for a certain thing, but when they get the money, it goes somewhere else. That’s the risk when giving away that kind of money,” he said.

Abu Sofian expressed hope that the initiatives and subsidies will help the economy to pick up, but said the corporate sector needed to review its business models and strategies to grow in this new economic environment.

“We have to look overseas as certain sectors can go global. We have gold-standard quality for certain goods like furniture and gloves, and they can be exported.” - FMT