THE government remains focused on addressing both lives and livelihoods at this unprecedented time, judging by the latest announcement of the Strategic Programme to Empower the People and Economy (Pemerkasa).
The underlying idea is not just about helping those who are really in need in a targeted and timely manner, such as the Bottom 40 (B40) and vulnerable groups, as well as small- and medium-sized enterprises (SMEs) and tourism and entertainment-related sectors, but also to stimulate and jump-start the economic growth momentum this year and beyond.
This can be seen with the introduction of strategic initiatives, such as focusing on strengthening the immunisation programme, empowering automation and digitalisation, and encouraging investments and exports under the newly launched RM20 billion stimulus package.
Pemerkasa is different in terms of strategy and coverage from the other five economic stimulus packages announced since March last year as we are now in the fifth phase of the "6R" approach introduced by the Perikatan Nasional government to tackle unprecedented challenges as a result of the pandemic.
The fifth R refers to Revitalise, crucial before approaching the final R, which is Reform. Thanks to the implementation of the previous economic packages, the Malaysian economy in 2020 managed to escape the worst-case scenario, which is plunging into the nastiest economic crisis ever recorded in history.
In this context, the economic contraction of 5.6 per cent last year is actually not a bad one.
The economy contracted more severely during the 1997/98 Asian Financial Crisis. In 1998, the aggregate output shrank to the lowest level in Malaysian history at 7.4 per cent. Even the expected worst-case scenario of 2.4 million job losses did not materialise, where in December 2020, the unemployment rate was 4.8 per cent.
For comparison, when hit by the economic crisis in 1985/86, the unemployment rate was much higher, at 6.89 and 8.26 respectively.
In fact, according to the Laksana report, 2.7 million jobs were saved last year under the wage subsidy programme alone.
In 2020, the total amount of the stimulus packages launched stood at RM305 billion, about 20 per cent of the gross domestic product (GDP). Out of that, RM55 billion involved direct fiscal injection. Despite this, the deficit level was still at a manageable level of 6.2 per cent last year.
Again, this is not the worst deficit in our history. Even in 2009, our deficit level was 6.7 per cent. The same is true with our debt to GDP ratio in 2020. The number is still relatively low in comparison with the debt level in 1986 or in 1987, where the debt level was recorded at 103.4 per cent and 101.7 per cent respectively.
All this data is clear testament to a success story of the current government in managing the economic impact of Covid-19 last year.
With both Permai and Pemerkasa, the total amount of economic relief is RM340 billion, or 24 per cent of GDP, where RM72.6 billion is in the form of direct fiscal injection.
This year might see a better prospect than last year as we are now in a much better position in understanding and responding to the virus.
Adding to that is the rolling out of the immunisation programme, where herd immunity is expected to be achieved at the end of the year.
More importantly, we entered the year 2021 in a stronger economic position. The fallout in 2020 was not as severe, putting Malaysia in a good position to embark on the next phase of the "6R" approach. With Permai and the latest one Pemerkasa, our fiscal position will be affected.
Our growth momentum must be sustained beyond 2021 at the rate of five per cent to six per cent on average per annum so that our fiscal consolidation agenda and resiliency of the economy remain intact.
Higher rate of economic growth also means more jobs can be created, more can be pulled out of poverty and more assistance packages can be introduced.
More important than the rate of growth moving forward is the direction of growth. A clear sense of direction and long-term vision for the economy are paramount post-Covid-19 pandemic.
Perhaps we should start by thinking big and rethinking how the role and relationship of the government and the private sector in navigating our economy in the future should be.
The final "R", which is Reform, is indeed crucial.
The writer is AssociateProfessor ofEconomics, Universiti UtaraMalaysia
The views expressed in this article are the author's own and do not necessarily reflect those of the New Straits Times