Government Will Continue to Focus on Existing Stimulus Packages

Following the economic stimulus package (PRIHATIN) of RM260bn or 17.3% of GDP and the introduction of the National Economic Recovery Plan (PENJANA) with additional stimulus of RM35bn or 2.7% of GDP, MOF guided that any other new stimulus measures will likely be proposed in the Budget 2021 announcement in November to support growth in 2021. Both the Prihatin and Penjana totalling RM295bn or about 20% of GDP will roughly add about 3.1 percentage points to GDP growth in 2020. With the end of movement control order (MCO) and Conditional MCO from 18 March to 9 June 2020 in various phases, and with economy currently operating at close to maximum capacity during the Recovery MCO, we believe Government will continue to focus on the existing stimulus packages to revive and support domestic economic activity. The country’s budget deficit will likely hover in the range of between -5.8 to -6% of GDP projected for 2020 (-4.7% of GDP previously estimated). The direct fiscal injection by the government for both stimulus packages amounted to RM45bn.

In the ninth update of the PRIHATIN stimulus package, Ministry of Finance (MOF) guided an increase in cash assistance (due to appeals for BPN being approved as at 12 June), with disbursement of RM162mn to be paid out at the end of June 2020. The BPN program has a total allocation of RM11.5bn with 10.6 million recipients. For the EPF i-Lestari, MOF updated that the programme for members to make withdrawals from Account 2 saw number of applications approved increased to 4.22m (from 4.1m previously), with a total payout of RM1.98bn a month. Besides that, for the bank moratorium since its implementation on 1 April until 12 June, moratorium repayment of loans by financial institutions is estimated to be RM40bn starting 1 April until 12 June 2020. We believe these measures implemented will help to support and increase disposable income for household and business. In terms of other measures, such as the wage subsidies program, as of 12 June, the applications approved have increased to 295.3k employers representing 2.31 million workers (2.3mn workers previously), where RM4.08bn had been approved (RM4bn a week ago). The wage subsidy and employment retention program will guarantee the employment continuity for 2.4 million workers.

Due to the rise in direct fiscal injection of RM45bn of the RM295bn total stimulus packages, the Government guided it will borrow around RM35bn to fund the deficit. So far the Government guided that it has been using local borrowings (MGS and MGII) to fund the implementation of both Prihatin and PENJANA stimulus packages.

Source: Affin Hwang Research - 18 Jun 2020