A lesson that could be learned from the Covid-19 outbreak is that companies need to diversify their procurement and not to be overly dependent on one country. — Bernama photo
KUALA LUMPUR: The proposed economic stimulus package to cushion the negative impact of Covid-19 is timely to boost the domestic economy as the external sector has become increasingly wobbly, according to economists.
Bank Islam Malaysia Bhd said all support measures to be taken are set to complement the recent reduction in the overnight policy rate by 25 basis points to 2.75 per cent to boost spending.
“Other areas should include optional reduction in the Employees Provident Fund’s employee contribution rate,” its chief economist, Dr Mohd Afzanizam Abdul Rashid told Bernama yesterday.
He said this would put more money into the people’s pocket to ensure consumer spending remains an important driver for domestic growth.
Other proactive moves include providing more financing to affected sectors, especially the tourism industry and a financial guarantee scheme to assist businesses in loan refinancing, he added.
Prof Datuk Dr Shazali Abu Mansor of Universiti Malaysia Sarawak’s Economics and Business Faculty opined that the stimulus package should be spread across all industries and businesses of all sizes to obtain a higher multiplier effect.
“It would give better linkages,” he said, adding that large companies normally would take time to kick off a project than small and medium enterprises which start a venture in a short time.
Thus, he said the multiplier effect is much faster, especially for packages that are tourism-related.
To stimulate domestic tourism, Shazali said incentives should be introduced in the form of hotel and homestay discounts, toll rate reduction, as well as tax exemptions for big hotels.
“The country needs a stimulus package to generate better economic growth, for instance carrying out small projects like building schools or other similar projects nationwide, so that overall growth can be achieved,” he said.
On whether the stimulus package would widen the government’s fiscal deficit, he said the government has to make a choice either to stay on a surplus or be in deficit.
“At a certain stage, if the growth is more important than the deficit, for the wellbeing of the economy and the rakyat, why not make a choice that will make the people prosper, rather than have a budget surplus.
“Many other countries such as Singapore and Japan have a budget deficit but they are still doing alright,” Shazali asserted.
Meanwhile, Afzanizam said a lesson that could be learned from the Covid-19 outbreak is that companies need to diversify their procurement and not to be overly dependent on one country.
“In that sense, there is an opportunity for Malaysia to promote the country as a production hub for high value-added products.
“We have the selling points that can be pitched for more quality foreign direct investments in the form of reliable electricity supply, highways and a pool of talented workforce,” he said. — Bernama