Sudden policy announcements: Uncertainty causing fear of spending money

 

Last-minute Covid-19 policy announcements will cause people to become uncertain about their future which will lead to reluctance in spending money, even if they receive financial aid from the government.

This is the exact opposite of what is needed to revive the economy, said Khazanah Research Institute research advisor Jomo Kwame Sundaram (above).

"We have to remember that businesses cannot just be closed like (flipping) a switch. We cannot say close tomorrow and then in two weeks, tell them they can open with a day’s notice.

"They cannot anticipate the next hit and they cannot plan for it so when they get a little bit of (financial) help, which is not much, and they do not know when they can get their next source of income, they would rather not spend the money," he said.

The economist explained that financial aid which reaches the public, especially the needy, should be spent to revive the economy. However, a problem is caused when they do not spend.

Jomo was a panellist for an online forum last night called "Budget 2021: Moving Towards Recovery" organised by the International Islamic University Malaysia. Also on the panel was Kangar MP Noor Amin Ahmad.

At this stage of the fight against Covid-19, there is still a need to prioritise the welfare of the people, Jomo said, especially groups which are often overlooked, such as labourers and small, family-run businesses.

"Even though it cannot be denied that some have received help from the government with the Prihatin stimulus package, but there are many who have been overlooked.

"Daily labourers are often sidelined and their fate is almost similar to foreign workers who are going through quite a terrible situation.

"The small-time businesses, they are also facing their own problems. They have to pay for a number of things including rent and so on, but they do not have any source of income now, so they are in a tight situation," he added.

Jomo noted that there have been several successful government policies, such as subsidies given to employers in order to keep their employees and prevent the unemployment rate from skyrocketing.

When asked whether the government should extend the loan moratoriums, which expired in September, Noor Amin (above) pointed out that Budget 2021 included a plan to implement targeted moratoriums, though the method of implementation is still unclear.

“But I am confident that moratoriums can be done. Banks have a social responsibility as well.

“Anyway, if people cannot serve their loans, the banks will also run into problems,” he said.

Jomo also believed the moratorium should be targeted. He pointed out that very few countries in the world gave a blanket moratorium on loans like Malaysia did and instead, many governments gave direct aid to their citizens with loans.

“I am not saying we cannot do the moratorium, but this is a rather crass method. We should be more precise in our targets.

“For me, there are certain people who should not be given moratoriums and there are those who need it. We should ensure that actions like moratoriums will benefit those who truly need help, and it should not be handed out at random or to everyone,” he added. - Mkini