A major shift in economic paradigm is needed to defeat Covid-19

MP SPEAKS | The fallout from the coronavirus pandemic is something we have never witnessed before in Malaysia’s history. The movement control order is necessary to overcome the pandemic. But the economic recovery will not be achieved through conventional stimulus.

The recently announced economic responses to Covid-19 falls short.

Aside from some budget allocated for the Ministry of Health, the coronavirus-response package recently announced does not go nearly far enough and it also only offered limited solutions.

The announcement by the government that workers can withdraw RM500 per month for a year from their retirement savings was widely criticised.

Why? This is because many Malaysians are already earning meagre salaries, with insufficient savings and are forecasted to live longer. In 2017, only 18 percent of EPF members met the minimum savings target of RM228,000. Khazanah Research Institute estimated that almost half of EPF contributors will have sufficient savings in place to withdraw RM500 for even six months.

The benchmark for fiscal stimulus is 4-10 percent for developed countries. Even our neighbour Indonesia has announced a fiscal stimulus of 1.4 percent of GDP. Malaysia’s fiscal stimulus to date of a mere 1.2 percent of national GDP is simply insufficient.

Efforts to merely tinker around the edges will not work as this global pandemic is unprecedented. The world that has grown smaller and more interconnected than ever before is now separated and isolated. The impact on Malaysia as a small, open, trading nation is massive.