LETTER: Although the announcement about the start of the Covid-19 vaccination programme is welcome news, there is concern that the rollout may have little effect on economic growth.
The first phase targets frontliners with the second phase in April targeting the elderly and other vulnerable groups, while the third phase affecting all adults will begin in May until February 2022.
A structured plan for vaccinations, however, provides an opportunity for the government to decouple health policy from economic policy and address the impending economic problems that will hit in the coming weeks and months.
Although the economy contracted by 5.6 per cent overall last year, there were some signs of good news in the second half of 2020. After the rebound of the third quarter, there was continued improvement in the fourth quarter with private consumption rising 0.8 per cent, investment rising again (up 5.2 per cent), exports (up 2.2 per cent) and imports (up 4.7 per cent).
All of these quarterly changes suggest that the government stimulus packages may have begun to boost economic activity. There was also good news in the inventory cycle with companies having low stock due to a fall by RM5.9 billion in the fourth quarter following a similar cut of RM5.1 billion in the third quarter.
At the start of the crisis, companies had increased stocks involuntarily by RM6.6 billion in the second quarter due to poor demand. These green shoots of recovery have withered because in less than two weeks into 2021, Malaysians faced a second Movement Control Order (MCO 2.0) and the declaration of a state of emergency is set to run until Aug 1.
This has the effect of pushing the recovery phase, which had started in the third quarter, into the future by many months and taking a significant toll on gross domestic product.
MCO 2.0 has been much more liberal than the previous one and, according to government estimates, the impact is less severe.
The RM15 billion Permai stimulus package will not cover the losses due to MCO 2.0. It is not new money, but reallocated from the RM322 billion 2021 Budget already announced. It will also take some time to feed into the economy because it is spread across 22 programme themes and not, as would have been more sensible, a direct cash transfer to consumers.
To provide this direct cash to people in need, the EPF i-Sinar withdrawals will be crucial. Around RM24.5 billion is already confirmed and possibly RM12.9 billion more from applications still to be approved. This is RM37.4 billion overall, which is almost the same as the RM38 billion government "Covid-19 Fund" during 2020.
To begin with, this will pump RM13 billion confirmed and possibly RM6.6 billion to be approved into the economy quite quickly. A further RM17.8 billion will be made available later in the year. So the big stimulus is not a government stimulus, it is a "rakyat stimulus" more like "kita jaga kita", or "we take care of ourselves".
The problem is at the end of the process. Around 42 per cent of Employees' Provident Fund contributors, more than six million people, had less than RM5,000 in their accounts with 32 per cent of that group having less than RM1,000.
Therefore, it is time for the government to decouple health policy from economic policy and address the impending problem of private sector balances before the middle of the year when savings run out.
DR PAOLO CASADIO
Economist, HELP University
PROFESSOR GEOFFREY WILLIAMS
Economist, Malaysia University of Science and Technology
The views expressed in this article are the author's own and do not necessarily reflect those of the New Straits Times