KUALA LUMPUR: The 1Malaysia People’s Aid (BR1M) has helped low income earners with the increasing cost of living, but its continuance will further “cause” inflation in the system, said an economist.
Instead BR1M had pushed consumer costs to higher amounts, said BIMB Securities economist Imran Nurginias Ibrahim, of supplying a multiplier effect on the real side of the market.
“Although it’s well received and very popular, BR1M is, in part, fuelling an inflation phenomena, including demand-induced inflation, as traders and firms take advantage by increasing their costs, as can be found in recent months.”
He said it was stressing the direct cash transfers came from the coffers of the Federal Government and were spent as government consumption or current cost.
“This supplies minimal economic multiplier effects on the actual side of the economy, except for shoving consumer costs to higher levels.”
Imran said BR1M should be looked at as an ad-hoc measure, namely, a short term measure, instead of a long term or permanent option.
He said while the subsidy rationalisation programme was necessary, it should be implemented slowly, taking into account “shifting economic conditions”.
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Most economists have expressed concern over the sum, on the rear of the aspiration to reduce its deficit goals of the government.
An economist with an area bank said additional rationalisation of subsidies can be anticipated if the government is dedicated to addressing its fiscal position to take place shortly, including that the decrease in fuel subsidy could be a chance.
For 2014, the strategy was to reduce absolute subsidies to RM39.4 billion from the nearly RM47 billion allocated for various subsidies, bonuses and support in 2013.
Alliance Research leader economist Manokaran Mottain said as cash saved from subsidy reductions should go to those most in demand BR1M, to some certain extent, has failed to fulfill its goal.
“BR1M hasn’t helped the low income families and people as much, he said.”
Nevertheless, given that BR1M payouts may grow the present RM650, to RM1,200 from Manokaran said a fine tuning of the programme is needed to ensure its goals are fulfilled.