More fiscal measures needed for vulnerable groups, informal sector - economist

More fiscal measures are needed in Malaysia, targeting the vulnerable groups and workers in informal sectors, to cushion the segment from an economic crisis brought by the Covid-19 pandemic.

Fiscal measures refer to the use of government spending and tax policies to influence economic conditions, especially macroeconomic conditions, including aggregate demand for goods and services, employment, inflation, and economic growth.

Economist Jomo Kwame Sundaram said fiscal measures should have been better targeted to identify and ease the pain of the most vulnerable groups.

"For example, I think it is very inappropriate to increase the incomes of the civil servants while ignoring the needs of the informal sector and daily-rated workers and so on. What is needed for those businesses that are going south will be very different from those businesses that are likely to expand.

“For example, there is likely to be a far greater concern and interest not only in healthcare but also care in general; there exist far more needs for these," he said.

Jomo (above) was speaking at a webinar on "Rebuilding economies in the aftermath of Covid-19: OECD and non-OECD countries' responses" organised by Universiti Utara Malaysia's School of Economics, Finance and Banking today.

Also present was OECD director of country studies (economics department) Alvaro Santos Pereira.

Jomo added that there was also a need to redeploy people who would be dislocated from declining industries and reassign them to other booming sectors.

"These are not painless. This would cost money. It involves training while ensuring that they have basic incomes, be able to sustain demand. If aggregate demand collapses completely, that can be disastrous.

"And Malaysia, of course, is a very open economy," he noted, adding that much more sophisticated measures were needed to strengthen the economy.

"Just moving the interest rate down is just not good enough because of the very specific nature of this crisis. You need to be able to tailor your measures accordingly," he said.

Echoing Jomo's sentiment, Pereira said Malaysia needed to be focused on preparing the economy for the next wave of development.

The government needed to invest more and focus on improving education requirements and skills, he said, adding that many young Malaysians lacked the skills set required by multinationals operating here.

- Bernama