Another RM45b stimulus package needed to battle recession - Guan Eng

Former finance minister Lim Guan Eng today urged the government to introduce another round of economic stimulus package to prevent deflation.

The call was made following Bank Negara's announcement on Friday that Malaysia recorded 17.1 percent GDP contraction in the second quarter of 2020, which is the worst since the 1998 economic recession.

In a statement, Lim suggested that the government spends another RM45 billion to battle the economic recession caused by the Covid-19 pandemic, including financial aid to small and medium enterprises.

The moratorium on bank loans which expires this Sept 30 should also be extended by another six months, Lim added.

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

"The government should implement another cycle of post-Covid financial measures similar to the RM45 billion fund injection done earlier in April," he said.

Malaysia's economy sustained big blow when the government implemented semi-lockdown measure called the movement control order (MCO) in March, a move that it had to take in order to battle the then rapidly increasing number of Covid-19 cases in the country.

Following this, Putrajaya had announced two major economic stimulus packages dubbed Prihatin and Penjana, and one additional package, totalling RM295 billion. These included RM45 billion in the form of direct fiscal injection.

Bank Negara had also instructed for all banks to grant an automatic six months moratorium on all loan and financing payments, except for credit card balances, from April 1. 

On Friday, the central bank announced the 17.1 percent GDP contraction, attributing the decline to the "unprecedented impact of the stringent containment measures to control the Covid-19 pandemic globally and domestically."

Meanwhile, adding further, Lim claimed that the economic data shows that Putrajaya has not done enough to mitigate the recession.

This, according to him, was evident from the Bank Negara's report which shows the government’s second-quarter operating expenditure fell 2.1 percent from a year ago, compared to a 5.2 percent increase in the first quarter.

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

Lim said the 4.9 percent unemployment rate announced in June also hid the real fact of those who are underemployed and wage cuts that had been suffered by workers, including professionals.

"The unemployment rate of 4.9 percent in June hides the fact that there are many professionals such as pilots doing jobs other than flying airplanes. To put it simply, they are underemployed. Here, the government must realise that the quality of employment is just as important as the quantity of jobs.

"This says nothing of pay cuts many hardworking Malaysians suffered over the past few months. As reported by the Department of Statistics Malaysia in April, 84 percent of private employees had suffered pay cuts.

"Bank Negara also reported that during the second quarter, private wages fell by 5.6 percent from a year ago after rising 2.1 percent in the first quarter of 2020."

Lim said the data points to a real risk of deflation, which could hurt the people's living standards.

"There is greater urgency for another round of RM45 billion economic stimulus package to prevent deflation, including financial aid to small and medium enterprises and extending the moratorium on bank loans by another six months when it expires on 30 September.

"Failure to do so will cause greater hardship and even bankruptcy as many will struggle to serve their borrowings, either for cars, homes or business purposes," he added. - Mkini