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Kita Prihatin a preventive measure to curb fall in domestic demand - Economist


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23 September, KUALA LUMPUR – The RM10 billion Prihatin Supplementary Initiative Package (Kita Prihatin) is a preventive short-term measure to avoid further deterioration in domestic demand, which is one of the major contributors to the country’s economic well-being and growth, said an economist.

Bank Muamalat economist Izuan Ahmad said private consumption would be enhanced from the further monetary assistance to the B40 and M40 (bottom 40 per cent and middle 40 per cent income) groups, amid the current challenging period.

Prime Minister Tan Sri Muhyiddin Yassin today unveiled Kita Prihatin, comprising a RM7 billion Bantuan Prihatin Nasional 2.0 (BPN 2.0), RM2.4 billion Targeted Wage Subsidy Programme and RM600 million Prihatin Special Grant (GKP).

The Kita Prihatin package is the extension of the previous economic stimulus packages, namely the Prihatin Rakyat Economic Stimulus Package (PRIHATIN), Prihatin SME Plus and National Economic Recovery Plan (PENJANA) worth a total of RM295 billion, or about 20 per cent of the nation’s gross domestic product, with an additional fiscal injection by the government totalling RM45 billion.

In addition, Izuan said the extensions of the Wage Subsidy Programme and the Special Grant for Micro Enterprises signified the government’s continuous effort to provide aid to the small business community that was adversely affected by various challenges.

“The said extensions would enable the strengthening of business continuity for the targeted segments in contributing to the country’s economic growth as well.

“In essence, this latest package indicates that the targeted income groups and business community still need to rely on further assistance and aid from the government as they are hit by the negative repercussions brought upon by the pandemic and resulting lockdowns,” he told Bernama.

Hence, he said it was crucial for the Perikatan Nasional (PN) government to address the pandemic’s adverse impact on domestic demand and the economy, as it could not afford to leave behind the targeted segments in the country’s ongoing road to economic and financial recovery to achieve its targeted economic growth next year.

READ MORE: Government announces RM10 billion KITA PRIHATIN package

The Malaysian economy is projected to grow between 5.5 per cent and eight per cent next year.

For this year, Bank Negara Malaysia has forecast a gross domestic product (GDP) growth of -5.5 per cent and -3.5 per cent. Recovery is expected to take place in stages in the second half 2020.

Meanwhile, Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid views the Kita Prihatin announcement as a targeted approach taken by the government to drive the economic recovery process.

He said the increase in the debt ceiling from 55 per cent to 60 per cent of GDP gave flexibility to the government to support economic growth.

Last month, parliament approved the government’s plan to increase the country’s debt ceiling to 60 per cent of GDP from 55 per cent of GDP previously to mitigate the impact of the COVID-19 pandemic.

Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz said the government had not used foreign borrowings to finance PRIHATIN and PENJANA, instead using local borrowings by tapping into the local bond market, especially the Malaysian Government Securities (MGS) and Malaysian Government Investment Issues (MGII).

“The  wage subsidy measure can reduce the affected employers’ wage cost. The GKP can assist small and medium entrepreneurs in managing their cash flow and working capital as well as in boosting production via investment in capital goods.

“The cash aid under the Bantuan Prihatin Nasional can lessen the financial burden of the B40 and M40 group to purchase essential needs such as food and clothing. Thus, it (the assistance) is targeted and government resources can be optimised and have a multiplier effect on the economy,” Mohd Afzanizam said.


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