Under the epidemic, the world suffered. Malaysia, an important Southeast Asian economy, is no exception. This article is compiled from an article in the country’s well-known media Star, focusing on the specific impact of the new crown virus on the country’s economy.

It’s time to do something extraordinary.

In response to the economic impact of a new coronavirus outbreak, Malaysia has issued a RM250 billion (approximately US $ 583 billion) Economic rescue plan, which is almost one-fifth of the country’s gross domestic product (GDP) .

This is the largest economic stimulus package ever in Malaysia. Even looking at Asia as a whole, this initiative is one of the most active policies made by governments in all countries and regions in the face of this epidemic that has swept across the world’s billions of people.

At the launch of the national economic stimulus plan, Malaysian Prime Minister Muhiddin Yassin (Tan Sri Muhyiddin Yassin) said that this 250 billion The ringgit stimulus package will benefit all people in all parts of the country-especially those with relatively weak economic status.

It is reported that, including the RM20 billion issued in February, RM128 billion in the entire stimulus package is dedicated to protecting the basic lives of the people; RM100 billion is used to support business operations. (especially helping small and medium-sized enterprises to get through difficulties) ; another RM2 billion will directly affect important links in the national economy.

“This program will bring you immediate assistance and ease your economic and living burden.” Muhidin assured the public.

“I know that you are all concerned about whether this economic stimulus package will benefit you. Here I want to emphasize that everyone will enjoy the benefits of the stimulus package; no group in the country will be excluded , No one will be left behind. “

The main measures of the plan include distribution to eligible families and businesses directly affected by the outbreak.Cash; Introduce salary assistance programs to avoid mass unemployment; and provide financial support for SMEs.

However, this stimulus package will also cause Malaysia’s government fiscal deficit to expand from 3.4% of GDP in 2019 to about 4.9% this year.

Because of this, Muhidin emphasized that all the measures introduced this time are almost one-off. This is to ensure that no additional financial burden is placed on the government in the medium-term economy.

“The main reason for doing this is to take into account the state’s fiscal health, especially the issue of debt growth. The government will next consider introducing fiscal consolidation measures in the medium term to create long-term and reliable fiscal budget space for economic growth . “

According to economists, only 25 billion of the RM250 billion stimulus package comes directly from the government. There are RM100 billion in funding from the government’s deferred repayment of loans to Negara Bank; 50 billion in guarantees from Danajamin; and RM40 billion from the National Provident Fund Reserve (Household EPF savings) .

(Translator’s Note: Danajamin Nasional Berhad is a financial institution in Malaysia with headquarters in Kuala Lumpur)

Similarly formulated “antidote”

From an international perspective, Malaysia ’s expansionary fiscal policy this time is not alone. In order to deal with the impact of the new crown virus on the economy, major economies have taken positive actions in recent weeks: central banks of various countries have rushed to launch aggressive loose monetary policies, drastically cut interest rates, and lower bank capital reserve requirements; governments are increasing fiscal While spending and actively responding to the epidemic, an economic stimulus package including tax cuts was introduced.

Singapore ’s second wave of fiscal stimulus package has been released with a total of S $ 48 billion (about 143 billion ringgits, US $ 33.6 billion) The United States is even stronger. The Senate has passed an unprecedented $ 2 trillion bailout plan.

On the whole, the main ideas of economic recovery plans in various countries are to enhance liquidity: on the one hand, to find cash for the public to stimulate consumption; on the other, let companies reduce losses and better manage free cash flow to avoid large Large-scale unemployment has occurred.

But Rao is so. The future trend of the global economy is still not optimistic.

According to the International Monetary Fund’s (IMF) , the world will face the risk of economic recession in 2020. The situation may even be worse than in the 2008 global financial crisis.

The agency predicts that in the face of the economic crisis caused by the epidemic, advanced economies will be fine; but emerging markets and low-income countries may face great challenges.

Entry into the National Economy of the ICU

Malaysia has more than 2,000 confirmed cases, and the number of patients in the Asia-Pacific region is second only to China and South Korea. Although more than 250 people have been cured so far, 26 people have been killed by new crown pneumonia.

In terms of the impact of the virus on the national economy, Malaysia and many other economies in the world, the biggest test facing the country’s economy is not mainly from the virus itself, but a series of measures taken by the government to prevent and control the virus.

On March 18, Malaysia issued a “foot-ban” (Movement Control Order) , and the end time is tentatively scheduled for April 14. Since then, the entire country’s economy has entered a semi-paralyzed state. As millions of people can only stay at home, and almost all business activities are forced to stop, individual economic pressure has increased sharply: employees’ income has decreased, and even they face unemployment distress; employers have no money to make and are forced to shut down Many people’s hard-earned savings and retirement benefits have gradually evaporated during the economic shutdown.

For example, it may not be appropriate. Today, the Malaysian economy has been pushed into the intensive care unit (ICU) .

In Penang, Malaysia’s economic capital, customers need to take a temperature test before entering the supermarket

Malaysian Economic Research Institute’s (MIER) is very pessimistic. They predict that Malaysia ’s economy will shrink by 2.9% this year; It will reach 2.4 million, of which 67% belong to unskilled ordinary workers; the total income of households across the country will be reduced by RM95 billion or 12%. Based on the above data, the think tank agency believes that Malaysia’s annual consumer spending will shrink by 11%.

But on the positive side, losses are still manageable. MIER believes that this large-scale stimulus plan will help the national economy achieve a V-shaped recovery when it enters 2021.

Pain first, then talk

Although the economic stimulus plan will not solve the existing economic dilemma once and for all, for many economic entities, it can indeed relieve pain-especially for small and medium-sized enterprises with rapid cash flow loss and a sharp decline in income. Low-paying families who are worried about food and clothing.

“Now we urgently need a potent medicine to alleviate the economic pain caused by Covid-19. Although the incentive plan cannot stop Malaysia’s economic downturn this year, it can at least control the magnitude of the contraction.” < / p>

The above sentence is from Lee Heng Guie, Executive Director and Economist, (SERC) , Center for Social and Economic Research. In his opinion, when the new crown virus invades aggressively and economic development is frustrated, even many profitable and financially healthy companies will inevitably encounter short-term financial difficulties. In the next two to three months, many SMEs may experience depletion of cash flow. Even if some of the lucky ones survived this difficult period, if the crisis has not passed, then their financial situation will be six months or even a whole year.The situation will be extremely worrying.

“So, the economic stimulus plan introduced at this time will become a safety net for enterprises. It will support small and medium-sized companies to withstand this unprecedented shock, help them to resume work smoothly, and prepare for a rebound after the economic downturn Ready. “

Lee Heng Guie, Executive Director and Economist, Malaysian Centre for Social and Economic Research

As we all know, the survival of SMEs is extremely important to Malaysia because they are the lifeblood of the national economy.

At present, the output value of SMEs has reached 40% of the gross domestic product; its export value accounts for 20% of the total export value of the year. Data from the Bureau of Statistics also show that 98.5% of Malaysia’s commercial institutions are small and medium-sized enterprises, and their business areas have covered various industries across the country.

In addition, 65% of workers in the country work in SMEs. This also means that if a large number of SMEs that have suffered huge losses have closed down, it will bring a large number of unemployed people.

Although the government has invested heavily and implemented a radical rescue plan, (SME Association of Malaysia) Datuk Michael Kang is still worried that RM250 billion is not enough to drag many companies out of the crisis of the new crown crisis. Kang predicts that 50% of SMEs in the country will be closed down and 4 million people will face unemployment risks.

Easy budget pressure

The economic stimulus package may have a certain boosting effect,But it must be pointed out that fast-rising government spending will undoubtedly put new pressure on budget balance.

Since the Asian financial crisis in 1997, Malaysia’s annual budget deficit has increased. By the time of the worst global financial crisis in 2009, the budget deficit had reached 6.7% of GDP. Fortunately, the deficit has gradually decreased in recent years, and it has shrunk to 3.4% of GDP last year.

But in this extraordinary period, whether to increase the fiscal deficit is no longer the focus of discussion.

“The growing fiscal deficit and increasing government debt are indeed worrying, but the government’s current priority is to stimulate private consumption. After all, consumption accounts for up to 60% of GDP. Consumption can ensure that the economic situation does not continue to deteriorate. “

Allianz Bank (Alliance Bank, Malaysia’s ninth largest financial institution) Chief Economist Manokaran Mottain (as shown below) .

Institute for Democracy and Economic Affairs (IDEAS) Falling blood in Malaysia, blood loss in Malaysia

It is important to point out that when the Malaysian government formulated the 2020 budget, the oil price was estimated at US $ 62 per barrel.

But we all know that the price of oil is plummeting, and the current transaction price is already less than $ 30 per barrel.

According to Manokaran’s estimation, for every dollar drop in oil prices, government revenue will be reduced by RM300 million. Therefore, this straight drop in oil prices will cost the Malaysian government a direct loss of RM12.6 billion.

Despite the serious situation, Manokaran believes that the government can develop countermeasures to ensure the sustainability of fiscal revenue. In his view, levying a goods and services tax and reducing fiscal allocations to non-critical areas may be a feasible solution to fill the budget gap.

As for the future economic trend of Malaysia, Lau of IDEAS believes that in addition to the government ’s macro-control effect, it is also necessary to pay attention to three “E prefix” keywords: Epidemic (Outbreak situation) , External (External Factors) , and Employment (Employment Status) :

The picture above shows the measures launched by the Malaysian government against the new crown epidemic; the picture below shows the economic challenges Malaysia has encountered since independence

“It is unclear whether the spread of New Coronavirus in Malaysia has reached its peak. What we can ascertain is that the longer the epidemic lasts, the later the recovery of daily economic activity will take place. And even after the peak of the epidemic has passed, The dilemma of the supply chain disruption will continue for some time, for a terrible reason: when the inflection point of the epidemic arrives, many suppliers and buyers may no longer exist. “

With regard to “external factors”, Lau’s point is:

“Like most countries, Malaysia ’s development is highly dependent on a healthy and stable external environment. The previous Sino-US trade war has spread to Malaysia and dampened investor enthusiasm. From this perspective, Even if Malaysia successfully controls the epidemic, as long as the external environment has not improved, it will be difficult for us to achieve a full economic recovery. “

Lau pointed out that if the duration of the epidemic continues to prolong and external challenges persist, Malaysia ’s domestic unemployment risk will increase; and the increase in unemployment will restrict the growth of private consumption, which in turn will curb On the demand side, companies continue to lose money. This is actually a vicious circle.

No one knows how long this war with the new crown virus will continue, but we know that the crisis will sooner or later. As the Italian ambassador to Greece said, although this common enemy we face cannot be seen or touched, it is not invincible after all.