PETALING JAYA: Umno deputy president Mohamad Hasan has urged Putrajaya to do whatever it takes to save the economy which has been left reeling due to Covid-19 and the movement control order (MCO).
In a statement, Mohamad said the world is going through unprecedented times with the global economy projected to contract by 3.2%, the sharpest decline since the Great Depression of the 1930s.
He said more than 34 million people around the world are projected to fall below the extreme poverty line and in Asia alone, the Asian Development Bank estimated that some 68 million jobs could be lost.
“In Malaysia, unemployment rates could reach as high as 9.2%, with B40 communities among the hardest hit.
“With the collapse of many businesses, Malaysia is experiencing its worst economic recession in its history. Certainly these are unprecedented times for Malaysia,” he said.
The unprecedented times, Mohamad said, require unprecedented measures to revive the economy.
“We need to do whatever it takes. We need to save Malaysians and preserve their livelihood.”
He said the government should not be confined to its fiscal deficit-to-Gross Domestic Product (GDP) ratio.
“Since the latest additional RM10 billion package announced, the government revised the fiscal deficit to 4.7% of GDP, wider than the earlier 3.4% of GDP after the first stimulus package, but lower relative to Malaysia’s fiscal deficit peak at 6.7% in 2009.”
Many experts, he said, believed this year’s recession would be worse than in 2009.
“Why are we still so careful to adhere to this fiscal deficit to GDP ratio? We need to understand that temporary large fiscal deficit for well-targeted assistance is imperative to avoid permanent economic and social damages.”
Mohamad, commonly known as Tok Mat, said there was a need to reconsider the adherence to the 55% debt-to-GDP ceiling as “escape clauses” were needed so that the government could deviate from the limit for a fixed period of time.
“In fact, we should allow a breach of another 5 to10% in debt-to-GDP.
“Having said that, corrective mechanisms need to be put in place when the economy improves, to prevent long term moral hazard and preserve Malaysia’s creditworthiness,” he said.
This is based on an understanding that the country can run large deficits and accumulate substantial debt so long as lenders believed it could service the debt in the future.
“This is just a temporary measure till the storm passes. This is to preserve the livelihood of many Malaysians especially those struggling to keep their head above water,” he said, adding it should not be an excuse for wasteful spending, leakages or political patronage.
“Instead, always keep the plight of the rakyat firmly in the centre of everything we do.”
Mohamad said there is a need to undertake large deficit-financed public investments through stimulus packages on a continual basis until the economy recovers.
“It is highly essential that our government preserves productive capacity while addressing increasing economic hardship and inequality, for the sake of a more resilient economy,” he said.
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