ERP to Focus on People, Businesses and the Economy

Government will reveal details of the Economic Recovery Plan (ERP) in early June, with further measures to support domestic economic activity for the periods June to December 2020. The earlier announced Economic Stimulus Package (PRIHATIN) of about RM266bn was intended to provide short term relief (3 to 6 months of assistance) to support the economy from the negative short term impact from Covid-19 crisis. However, the Government guided that the ERP is needed to ensure growth in domestic economy is sustainable over the short to medium term. The ERP is expected to focus on 3 main objectives, which are to empower people, propel businesses and stimulate the economy. This is intended to capitalise on the opportunities arising from the Covid-19 crisis for the country’s future economic development. However, Department of Statistics (DOSM) predicted recently that the country is heading into an economic recession in the next four to six months. Malaysia’s Leading Index (LI), which is used to anticipate the turning points in economic activity in the short term, declined sharply by 4.9% mom in March (-0.8% in February), its largest monthly fall since November 1991. We believe the Government is also introducing the ERP with some short term stimulus measures to support and help cushion the domestic economy from a sharp contraction.

In the seventh update of the PRIHATIN stimulus package, Ministry of Finance (MOF) highlighted that the much needed assistance from Bantuan Prihatin Nasional (BPN), the cash aid for the people, have reached and distributed by 97% and 96% allocation from Phase 1 and Phase 2. For the Phase 1 payout, as at 31 May, a total of 7.93 million recipients received payment of RM5.56bn, whereas for Phase 2, 7.9 million recipients received a total of RM3.55bn. For new applications, 2.08 million recipients from 2.3 million eligible recipients have received BPN payments amounting to RM1.57bn. In summary, the BPN program has a total allocation of RM11.5bn (an addition of RM1.5bn from initial allocation of RM10bn) with close to 10.77 million recipients (i.e. 96.5% disbursement overall).

In terms of other measures such as BNM's soft loan funds for SMEs, banks have approved loans worth RM6.9bn for over 16,833 SMEs, an increase of RM1.1bn from 14,075 SMEs previously. As for the Micro Credit Scheme, as of 31 May, of the RM700m micro-credit offered at 0% interest by BSN and TEKUN Nasional, about RM303m was approved from 20.5k applications combined. On the wage subsidies program, as of 31 May, the applications approved have increased to 286k employers representing 2.2 million workers, where RM3.22bn had been approved (from RM2.24bn two weeks ago). The wage subsidy and employment retention program will guarantee the employment continuity for 2.4 million workers. Please refer to the Appendix I for detailed status update.

With the Conditional MCO (CMCO) since 4 May 2020, where almost all economic sectors and business activities (possibly closer to 80%) re-started, the number of employees returning to work have also increased. According to DOSM, approximately 10.25 million or nearly 70% of workers were back at work as at 17 May. This was an increase from 6.64 million from 10 May. However, downside risks to the economy remain, with some concerns of second waves of infections of Covid-19, as happened in other countries.

Source: Affin Hwang Research - 3 Jun 2020