Fiscal Deficit Target to Increase to 5.8% of GDP Projected for 2020

Prime Minister Tan Sri Muhyiddin Yassin unveiled 40 initiatives under the National Economic Recovery Plan or Pelan Jana Semula Ekonomi Negara (PENJANA) worth about RM35bn, see Appendix 1. This was a top up to the earlier Prihatin Stimulus Package of about RM260bn. In total, the stimulus measures introduced have now reached RM295bn or about 20% of GDP. Similar to the Prihatin Stimulus Package, the PENJANA has three main thrusts, which are “Empower People”, “Propel Businesses” and “Stimulate the Economy”.

However, of the RM35bn allocated for PENJANA, about RM10bn will be direct fiscal injection from the Government. In a briefing by Finance Minister YB Tengku Dato’ Sri Zafrul Aziz, he noted that with the additional RM10bn direct fiscal injection, the country’s fiscal deficit target will be revised higher to around 5.8% of GDP from 4.7% of GDP previously. This would be its largest fiscal deficit position since 2009. Due to the rise in fiscal injection, the Government debt is projected to rise to about 55.6% of GDP, which is slightly above the self-imposed debt level of 55% of GDP. The Government maintains its real GDP growth assumption of -2.0% to 0.5% for 2020, as well as its forecast of Brent crude oil price of US$30/barrel for this year.

Source: Affin Hwang Research - 9 Jun 2020