Friday 29 Mar 2024
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This article first appeared in Corporate, The Edge Malaysia Weekly, on October 24 - 30, 2016.

 

THE RM6.8 billion allocation for the 1Malaysia People’s Aid (BR1M) programme will benefit seven million recipients.

Prime Minister Datuk Seri Najib Razak announced last Friday that BR1M will be increased for households in the e-Kasih database next year.

Households with a monthly income of less than RM3,000 will see their BRIM assistance increased from RM1,000 to RM1,200. Recipients under the E-Kasih programme who earn less than RM1,000 will see their assistance increased from RM1,050 to RM1,200. Households earning between RM3,000 and RM4,000 will have their assistance increased from RM800 to RM900. Single individuals earning less than RM2,000 will have their assistance increased from RM400 to RM450.

The Bereavement Scheme — which gives compensation of RM1,000 to deceased BR1M recipients’ next of kin — will be continued.

“Based on my calculation, if everyone utilises the RM6.8 billion, it could come up to RM971 per recipient, which is almost double the amount when the programme was started in 2012. I expect the RM6.8 billion to flow back into the economy quite fast, given that the propensity of the B40 group to save is relatively low.

“So far, the progressive increase in the BR1M plan appears to be sustainable. I reckon the government is confident about increasing BR1M because of the higher Goods and Services Tax collection and stable oil prices,” says Kenanga Research economist Wan Suhaimie.

“It could benefit the government in some ways …  if the higher BR1M and the general election coincides next year.”

Meanwhile, Singapore-based economist in the Global Treasury department of OCBC Bank Wellian Wiranto says, “Overall, it looks like a ‘something for everybody that matters’ kind of budget. The additional BR1M is a classic way of helping the poor in terms of fiscal handouts and there are no surprises there. In terms of impact on the economy, the poor will likely spend the additional income ... I don’t think the additional RM6.8 billion will boost growth to the upper end of 5%, though.”

An economist with a local bank-backed research house agrees that the allocation will boost private consumption. “Although it is a short-term measure, it will help stabilise the economic environment,” he says.

“There will be several spillover impacts and an immediate multiplier effect. Recipients will be the major beneficiary and some may even use the extra money to start micro businesses,” says Professor Mahendhiran Nair, an economist and deputy president of strategy at Monash University.

According to the Finance Ministry’s Economic Report 2016/17, household disposable income is the main determinant of private consumption, accounting for an average of 67.4% of private consumption growth.

“The increase in the earnings of the lower-income households will likely contribute to the growth in private consumption as they [those individuals] have a higher marginal propensity to consume,” the ministry says.

Citing Bank Negara Malaysia data, the ministry reveals that households with an income of less than RM1,000 a month spends on average 81 sen of every RM1 of additional income.

According to the report, the government disbursed last year’s RM5.4 billion allocation to 4.2 million households and 3.1 million single individuals.

 

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