Economists have warned that allowing withdrawals from the Employees Provident Fund or EPF as an emergency measure to cushion the impact of the Covid-19 pandemic may bring the country to a tipping point that will determine its economic path in the days to come.
The move, rolled out under the government’s i-Sinar and i-Lestari programmes, was one of numerous economic support plans unveiled last year.
But Geoffrey Williams from the Malaysia University of Science and Technology, said Malaysians are now stuck in a “survival trap” where the aim is to weather the pandemic even if it means using the last remnants of their financial means.
Speaking at a virtual briefing titled “Economic Recovery: Navigating Dangers and Opportunities”, he said allowing EPF withdrawals presents a serious structural problem as it will leave millions without pension provisions.
“We feel that we’re going to face a tipping point in the economy where, if the stimulus package doesn’t have the effect we hoped it would, the economy may tip further into a period of stagnation or even mild recession,” he said.
“If there is a downturn in the global economy, that might lead us into a much stronger recession or even a depression,” he added.
The i-Sinar programme is an extension of the government’s i-Lestari programme which allows a monthly withdrawal of up to RM500 from Account 2.
Under the initiative, EPF contributors have access to up to 10% of their savings in Account 1 as long as they have a minimum balance of RM100.
Economist Noor Azlan Ghazali from Universiti Kebangsaan Malaysia agreed that the economic stimulus packages rolled out by the government, including EPF withdrawals, are a survival move.
He added that they would not allow the country or the people to progress to a better state of living.
“The financial injections by the government will only allow people to continue the minimum sense of living,” he said, adding that improvements to micro-targeting could be made to address the problems of those in the B40 group.
Williams meanwhile said the 2020 lockdowns had taken Malaysia’s gross domestic product back to 2018 levels.
He said the economy might not return to pre-pandemic levels until mid-2022 under normal economic growth rates.
However he rejected the idea that Malaysia is moving towards a welfare state despite the various economic relief measures provided by the government.
He said the actual amount that the government is putting into the economy is relatively small.
“Most of the money comes from the pension funds of the poorest people in society who are carrying the weight of the policy decisions made by the richest people in society.”