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Saturday, February 27, 2021

Extension of MCO would bring grave hardship to SMEs and B40 group, say economists

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PETALING JAYA: Extending the movement control order (MCO) beyond March 31 will have a negative impact on the economy, according to economists.

Small and medium enterprises (SMEs) and those in the B40 group will take the brunt of this slowdown, they said.

However, they added that incentives in cash and kind to the people could help the country ride through the storm.

Professor of economics at the Asia-Europe Institute at the University of Malaya, Datuk Dr Rajah Rasiah, said the economy could go into recession if the MCO is extended.

“The SMEs and the B40 (the poorest 40% of Malaysians) will be hit hard because they usually don’t have adequate savings and are tied to household debts, making them the most vulnerable,” he told theSun yesterday.

He said there could be lay-offs and some employers might not honour retrenchment regulations.

Professor of economics at Sunway University Business School, Dr Yeah Kim Leng, said the nation’s production capacity would be reduced as assets are sold off and workers could be laid off or have their salaries cut.

He said public consumption, which accounted for about 60% of last year’s GDP, would see a steep decline as households are forced to curtail spending.

Meanwhile, Prof Dr Barjoyai Bardai of Universiti Tun Abdul Razak said the SMEs would not be able to offer paid leave to their employees if the MCO was extended.

“If the situation worsens, the government will have to come up with a large-scale humanitarian support of RM20 billion to RM40 billion,” he said.

Economist Muhammed Abdul Khalid said the government should provide monthly cash assistance of at least RM1,000 instead of allowing workers to dip into their Employees Provident Fund (EPF) savings.

He added that for those employed in private companies, the government could offer employers a subsidy of RM1,000 a month to be paid directly to each employee.

“This is to ensure that no one is retrenched.”

He said this would benefit up to 72% of the workforce (those earning below RM5,000 a month) and would cost the government RM26 billion in the next three months, adding that this would not be a strain on the government’s finances.

Independent economist Dr Baayah Baba said while allowing for EPF withdrawals would help those facing financial difficulties, the government could also provide non-monetary incentives by way of higher subsidies for water and electricity bills.

“I think a 20% discount would be a fair amount, considering everyone will be using more of it when staying at home,” she said.

Baayah also called on the government to reduce the ceiling price of all essential items in view of the drop in global crude oil price, pointing out that this could lead to savings in transportation.

Khazanah Research Institute urged the government to focus on a massive employment-retention programme, in its second stimulus package slated for March 30, to ensure households have enough resources to ride out the outbreak in the next few months.

Its deputy director of research Christopher W.W. Choong said the existing employment retention programme, which provides a RM600 payout to those forced to go on unpaid leave, is insufficient.

The Malaysia-China Chamber of Commerce and Malaysian Islamic Chamber of Commerce also jointly urged the government to provide RM1,200 each month, particularly to Cost of Living Aid recipients.

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(1 Year ago via sherhaslam Wednesday, March 25, 2020)