PENJANA Stimulus Worth RM35bn to Support Economic Recovery Plan

With the Economic stimulus package (PRIHATIN) almost near its completion stage, where measures introduced were properly implemented, the Government is now embarking on the National Economic Recovery Plan or Pelan Jana Semula Ekonomi Negara (PENJANA). The recent unveiled stimulus plan will aim to the help rehabilitate and support economic recovery. Of the RM35bn allocated for PENJANA, about RM10bn will be direct fiscal injection from the Government. In total, about RM45bn will be direct fiscal injection by the government from both Prihatin and Penjana totalling RM295bn or about 20% of GDP. As a result, the country’s fiscal deficit target will be higher by around 5.8-6.0% of GDP for 2020 (from an earlier target of 4.7% of GDP previously).

In a recent interview, Finance Minister YB Tengku Dato’ Sri Zafrul Aziz guided that, during a time of crisis, the country’s (targeted) deficit number is not so important, where focus should be on saving the economy. Nevertheless, the Government remains committed towards fiscal consolidation and will bring deficit level to a manageable level once the economy stabilises. Going forward, we believe that fiscal discipline should remain the guiding principle to maintain the country’s macroeconomic stability, where the focus of the upcoming Budget 2021 should also be on introducing measures to enhance Government’s revenue base.

In the eight update of the PRIHATIN stimulus package, Ministry of Finance (MOF) has made further progress in implementing measures related to cash handouts, Prihatin special grants (GKP) for SMEs, and wage subsidy programme, amongst others, see Appendix 1. In the Bantuan Prihatin Nasional (BPN), cash aid for the people, 10.04m out of a total 10.6m recipients received payment of RM10.78bn out of a total RM11.5bn, reaching 96.7% as at June 5, 2020. On the wage subsidies program, as of 5 June, the applications approved have increased to 293k employers representing 2.3 million workers, where RM4bn had been approved (from RM3.22bn two weeks ago). The wage subsidy and employment retention program will guarantee the employment continuity for 2.4 million workers.

As for the EPF i-Lestari, the programme for withdrawals from Account 2, the number of applications approved increased to 4.1m (from 4.0m previously), with a total payout of RM1.94bn a month. As for the programme for EPF’s employee contribution reduction from 11% to 7%, as at 5 June, over 5.7 million workers opted to reduce their contribution. Both these measures will help to support and increase disposable income.

In summary, some of the remaining measures under the RM260bn PRIHATIN measures will be implemented concurrently with those under Penjana economic recovery plan. As the Conditional Movement Control Order (CMCO) now replaced with the Recovery MCO from 10 June until 31 Aug 2020, together with the measures introduced recently, we believe the country’s domestic demand will likely recover in the coming quarters ahead. However, weak tourism-related sectors may still be a drag on domestic demand, where some SMEs may still probably face low cash inflow that will affect the future repayment ability. Exports may also be dampened by slower global growth and prolonged global supply chain disruptions.

Source: Affin Hwang Research - 10 Jun 2020