The recent spate of traffic jams on the streets of Kuala Lumpur may suggest that people are returning to work after a long spell of working from home although the covid 19 numbers have not fallen to a level that inspires confidence.
For businesses to start fully humming, they must be assured that the pandemic is under control or at least the authorities have clear ideas of how to contain the pandemic or bring it to an endemic stage.
The newly minted Prime Minister Ismail Sabri Yaakob and the team must announce clear policies for dealing with the pandemic and assure the public there will be no flip-flops in handling the pandemic.
In this respect, the new Health Minister Datuk Khairy Jamaluddin must be congratulated for announcing the simplification of health SOPs to help Malaysians prepare for the endemic phase of Covid-19 which is expected to occur by the end of October.
He added that Covid-19 would be managed like any other endemic disease and that his ministry was preparing a road map for the country’s transition to the new normal.
In addition, the government must also ramp up the vaccination rates to ensure that vaccines reach all parts of the country so that economic activity can be restored back to normal. In this respect, some 15.16 million doses of vaccines will be distributed to states lacking in vaccine supply to help boost the vaccination rates there.
The states are Sabah (to receive 2.9 million doses), followed by Johor (1.9 million), Perak (1.6 million), Pahang (1.4 million), Kedah (1.3 million), Kelantan (1.2 million), and Penang (one million).
Having clearly set the roadmap for dealing with the pandemic, the government can go on to mend the economy firstly by ensuring confidence in the economy by ensuring that there is good governance and efficiency in the delivery system. It needs to ensure that the MACC goes after the big fish and there are no leakages in the delivery systems. It also has to ensure that the various incentives unveiled by the government reach the target groups.
The responsibility of stirring the economy in the right direction rests with all of us and if gloom and doom are what we see, then we have only ourselves to blame if the economy heads in that direction and conversely the opposite if we are optimistic. Any student of economics understands that economics is a social science that has everything to do with people and perception and we must change the perception with the government taking a lead.
According to a recent report by Fitch Solutions Country Risk & Industry Research, the economic environment will continue to put significant pressure on Malaysian households’ disposable income, which will be reflected in their spending levels in H221 and likely spill over to 2022.
Considering the economy is reeling from the pandemic and consumer demand is sluggish, it is paramount that consumer confidence should be bolstered so that the economy can start gaining momentum. This can be achieved if the government starts increasing cash transfers to the distressed group notably the B40, those who have lost their jobs, and daily wage earners that will translate to increased consumer spending.
This will have a positive multiplier effect on the economy. In addition, confidence in the economy will also inspire confidence in the consumers who have postponed investments such as “buying a car or postponing a wedding” to go ahead with their investments and this will have an overall positive effect on the economy.
In this respect, the government can do its part by reducing stamp duty and subsidies that will facilitate consumers who deferred spending to immediately start spending. With increased consumer confidence and spending, producers will be tempted to make more investments and this will have a positive effect on the overall economy.
Although the government in the past had to adhere to a fiscal discipline by ensuring the statutory debt to GDP ratio is maintained, it is heartening to know the Finance Minister is mulling to raise the statutory debt limit to 65 percent from the current 60 percent of the gross domestic product.
The government’s efforts through increased spending will help the overall aggregate demand in the economy as the country’s exports are already chalking impressive gains. With the right prescriptions in place, the economy will be on track sooner than later.
