An additional RM45 billion economic stimulus package is urgently needed for Budget 2021 to save jobs following the unexpected rise in unemployment rate to 4.7% and contraction of IPI by 0.5% in October 2020. The Department of Statistics (DOSM) recently announced there were 748,200 unemployed persons in October, an increase in 0.1 % to 4.7 % in October compared to 4.6% in September.
The country’s year-on-year (y-o-y) IPI contraction in October 2020 by 0.5% was a surprise following three consecutive months of growth in July, August and September, as the nation contended with the economic impact of the Covid-19 pandemic. DOSM said prior to the the IPI’s y-o-y 0.5% contraction in October 2020, the IPI grew 1.2% in July, 0.2% in August and 1% in September.
Many had expected the unemployment to drop and IPI to continue growing in October following the easing of COVID-19 movement restrictions. The 748,2000 unemployed persons appears to match Human Resources Minister M.Saravanan’s prediction of 1 million unemployed Malaysians by September including both the informal sector, school-leavers and new university graduates.
Clearly the anticipated economic recovery from improvements in global economic growth and trade has stalled in Malaysia and run out of steam. Not only has the IPI contracted, but there is a sharp decline in Malaysia’s gross fixed capital formation by 11.6% in the third quarter this year. This sharp decline is a setback for economic confidence of future growth and damages Malaysia’s competitiveness, since other countries in Asia are not experiencing the same phenomenon.
An additional RM45 billion for Budget 2021 is therefore needed to create new sources of economic growth and slow down retrenchments, job losses and business closures. The RM45 billion should be utilised to address five key thrusts.
5 Key Thrusts Of The RM45 Billion Economic Stimulus Package
First, there should be immediate implementation of the increase in monthly welfare aid from RM200-300 to RM1,000, including the unemployed that is expected to hit 1 million Malaysians, that will cost RM12 billion a year. This will provide an immediate safety net for unemployed workers during the duration of the COVID-19 crisis.
Two, an automatic extension of the moratorium of bank loan repayments, excluding the Top 20%, by another 6 months after 30 September, costing RM6.4 billion that will help 8 million Malaysian individuals and companies. In contrast the targeted bank loan moratorium extension and bank assistance after 30 September, have assisted only 645,000 borrowers, which is only 8% of the original 8 million borrowers.
This has benefited only financial institutions by merely extending the loan repayment period, thereby requiring borrowers to pay even higher interest payments. The fact is that the banking industry recorded RM32 billion in profit in 2019 and despite the COVID-19 crisis in 2020, continues to record profits without any banks incurring losses.
Three, work hiring incentives over a period of 2 years, under Malaysia@Work of RM500 a month to employees and RM300 per month to employers to encourage them to hire local workers as proposed by PH in the 2020 Budget. Expanding this scheme to cover 600,000 Malaysian workers and their employers would cost RM13 billion. This would also help the more than 500,000 youths who are unemployed.
Fourthly the remaining RM4 billion should be spent on digitalising education including buying laptops to provide on-line learning for students not able to attend schools. Malaysian education is in crisis this year, when students attend only 4 months of schooling. The loss of human resource training is immeasurable. Malaysian students should be given the option of on-line learning.
Fifthly, RM10 billion in financial grants should be given to provide a lifeline for new and existing businesses, loans and credit extensions, especially for the crippled tourism industry. For the tourism industry alone, for the first 9 months of this year, Malaysia received RM54 billion less in tourism receipts as compared to the same period last year. Not just the tourism industry is on “life-support”, other industries are also suffering.
There is growing pessimism that there will be positive economic growth for the final quarter this year and 7.5% economic growth next year as predicted by the PN Federal government. The government must lend a helping hand with a similar RM45 billion economic stimulus package next year if we are to generate sustainable economic growth and prevent the unemployment rate from deteriorating to the previous high of 5.3% in May 2020 during the nation-wide COVID-19 lockdown.