Two economists have urged the government to invest stimulus package money in long-term economic recovery efforts and to be cautious against tunnelling in on short-term economic effects.
Barjoyai Bardai of Universiti Tun Abdul Razak said the government should prepare the nation for what would come after Covid-19 ceased to be a threat, and Geoffrey Williams of Malaysia University of Science and Technology called for recognition that the economy was currently in a delicate position.
Barjoyai said he expected the fifth industrial revolution to follow on Covid-19’s tail, resulting in more Malaysians being locked out of work by technology.
“The current issue with the Malaysian economy is that it is still overdependent on its human capital,” he said. “Other developing countries are transitioning to focus on technological development to make their economy grow.”
Referring to Pakatan Harapan’s proposal for a RM45 billion stimulus package, he suggested that the money be invested in research and development projects and in retraining programmes to prepare Malaysians for the job market to come.
“Stimulus packages are well and good, but their effects are far from immediate,” he told FMT. “We should have faith in the economic cycle.”
He said success depended on whether Malaysia was willing to persevere for the long haul.
“Looking to the future is important, but the future means little if we can’t work hard enough to get there.”
Williams acknowledged that there was some good news in the last quarterly growth figures, but he said the impact of the second movement control order needed to be factored in.
He told FMT he expected the economy to face a tipping point in the middle of this year when the government’s stimulus would have run dry and the possible consequences would range between low economic growth and an extended recession.
By then, he said, consumers would have run out of money and depleted their Employees Provident Fund (EPF) savings.
He estimated the cost of the second lockdown at RM35 billion and said it would affect the government’s gross domestic product growth estimate, cutting it to between 4% and 5%.
“The Permai stimulus package will have little to no impact because its RM15 billion is reallocated from the existing budget for 2021,” he said.
Given that it was channelled through multiple schemes, he said, it would take time to see the desired economy-wide effect.
Williams also expects severe structural issues to bubble onto the surface.
“This includes a pension black hole due to EPF withdrawals, a debt overhang and structural unemployment with persistent low wages,” he said. “Start-up, scale-up and basic survival strategies for firms will require policy intervention.”
He said the effects of policy intervention could not be realised overnight and cautioned the government against injecting money into a laundry list of projects immediately.