The COVID-19 Hardship Survey: An Evaluation of the Prihatin Rakyat Economic Stimulus Package

Dr. Sam Flanders, Dr. Melati Nungsari, Chuah Hui Yin | Research Series

Series Type: Working Paper

The COVID-19 pandemic has caused a global crisis, and, while Malaysia has controlled the infection more than most countries with early exposure to the virus, the Movement Control Order (MCO) has required major economic sacrifices. This, in addition to a COVID-19-caused global economic slowdown, threatens a budget crisis for Malaysian households. Malaysian households often carry a great deal of debt and have little savings; without a source of income, many households could quickly lose access to necessities like food or housing. In response, the Malaysian government has created a series of stimulus packages. This report uses a survey of Malaysian household income and expenditures conducted from the 20th to the 27th of March to analyze the effect of these stimulus packages on the cash-flow and solvency of Malaysian households. We find that they are likely to address most of the cash-flow issues brought on by the COVID-19 crisis, at least in the short term. While a substantial minority of M40 respondents and a nearly half of B40 respondents reported negative cash-flow due to the crisis, the stimulus policies are able to decrease negative cash-flow rates among our respondents to levels at or below those that persisted before the COVID-19 crisis for the month of April, assuming income and expenditures from March persist. Among the minority who still have negative cash-flow, most have enough savings to survive for more than three months. However, a small minority of respondents in our survey are still likely to run out of money in the next few months, especially among the B40. If policymakers wish to further protect households from budget crises after the one-time transfers of April, our analysis shows that transfers to lower-income households—families making RM 4,000 or less and single individuals making RM 2,000 or less—are dramatically more effective than transfers to higher income households. There are several caveats to our conclusions: our sample is not representative, and our cash-flow estimates are only approximate, so our results should only be viewed as suggestive. Additionally, our responses come from the beginning of the MCO, so they likely undercount the number of Malaysians who have lost their jobs or have decreased income. Finally, this analysis assumes benefits can be easily and quickly disbursed to distressed households. Elderly individuals or those in rural areas may not have the internet access or expertise to secure their benefits, and delays in disbursement could be catastrophic for households with no savings.