KUALA LUMPUR: The RM250 billion Prihatin Rakyat Economic Stimulus Package (Prihatin) will help workers and businesses cushion the impact of the Covid-19 pandemic, economists said.
The country’s largest ever stimulus package was also poised to renew confidence, particularly among small- and medium-scale enterprises (SMEs), which would continue driving the economy, they added.
“Prihatin is a great boost to businesses. This is especially important for SMEs as the government went all out to ensure that the majority of them will not go bust, which will render millions of workers jobless,” Associate Professor Dr Ahmed Razman Abdul Latiff told the New Straits Times yesterday.
Razman said the main strategy was to ensure that businesses maintained their liquidity.
He said the measures included a six-month moratorium of bank loans, huge discounts on electricity bills, restructuring and rescheduling of employer’s contribution to EPF, exemption of HRDF levy and deferment of company taxation.
“This will allow businesses to use their cash resources on essential operating expenses and, at the same time, be able to retain the majority of their workers without affecting their salaries.”
Bank Islam chief economist Dr Mohd Afzanizam Abdul Rashid said the Prihatin package would benefit all segments of society.
He said the RM250 billion had taken into account the previous measures announced earlier.
“We will see cash transfers to be paid to the B40 and M40, wage subsidies and measures to support businesses.”
He said the stimulus package was huge and comprehensive. Therefore, it was imperative for everyone to adhere to the Movement Control Order (MCO) so that the country could break the chain of Covid-19 infection.
“The sooner MCO is lifted, the better it will be for our economy. But this will be contingent upon our success in combating and suppressing the pandemic,” he added.
The Prihatin package unveiled by Prime Minister Tan Sri Muhyiddin Yassin yesterday was the second released by the government since the beginning of the pandemic.
From the amount, RM128 billion will be used to protect the welfare of the people and RM100 billion is to support businesses, including small- and medium-scale enterprises (SME).
Economists said while endorsing a prudent fiscal policy, the government was mindful about the budget deficit and curbing unnecessary expenditure.
“The government’s expansionary fiscal policy lever is aimed at spurring growth and maintaining the growth trajectory. If local investors are confident in the economy, we can expect foreign direct investments to come in huge numbers,” said Juwai IQI chief economist Shan Saeed.
He said Prihatin was timely and well directed to all Malaysians in line with Muhyiddin’s remarks that “everyone will be taken care of and nobody will be left behind”.
“It is simply remarkable and appreciates the role SMEs have played in the social and economic development of Malaysia, providing millions of jobs.
“At this challenging times, the much-needed support, especially for SMEs, is vital to provide stability in their employment.
“SMEs have also contributed significantly to the country’s gross domestic product equation at the macro level for many years,” Shan added.
He pointed out that there was no financial assistance given specifically to big corporations or multinational companies (MNCs) operating here.
Shan said these companies were likely able to sustain their operations as they had the financial ability to navigate through turbulent times.
“Big corporations or MNCs usually get support from head offices. This Prihatin package is aimed at SMEs that are the backbone of the economy and to uplift the masses, as well as send positive signals to the local and international markets while growing the economy in a structured manner,” he said.
Although many industries were facing short-term challenges with the slowing global economy, Shan said the country would likely manage and survive the volatility.
“This is because Malaysia’s labour force is resilient, tech-savy and productive to brave the challenging period,” he said.
Sunway University Business School economics professor Dr Yeah Kim Leng said local companies could benefit from a RM50 billion government guarantee scheme via Danajamin Nasional Bhd, with a guarantee coverage of 80 per cent for financing of working capital needs.
“This scheme serves as an accessible avenue for companies which need to borrow for working capital or capital investment.
“That would be helpful to all companies that require some credit facility, especially during this challenging period,” he said.
The facility is applicable for all businesses. The minimum amount of financing is RM20 million for each business, with applications to open from May 1 to Dec 31, or until the fund runs out.
Yeah said the scheme was also expected to benefit about 1,000 local companies.
“MCO has affected company operations and caused them difficulty in having cash flow. If they do not have surplus working capital, they can borrow from a guaranteed loan fund from the government to tide over.”
Yeah expected a severe economic impact as businesses close down during the MCO, which will result in a sharp decline in consumption and production.