• Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz guided that Malaysia's economy is on track for recovery in 2021
• The Moratorium on Loan Repayments increased to RM66.6bn as at 31 July (from RM62.8bn in previous week)
• Under the Wage Subsidy Programme, the applications approved increased to 2.6mn workers as at 31 July (2.58mn workers previously), where RM8.99bn had been approved (RM8.97bn previously)

Initiatives Under PRIHATIN and PENJANA Showing Positive Development

In the sixteenth update of the PRIHATIN and PENJANA stimulus packages this week, Ministry of Finance (MOF) updated that as at 31 July 2020, the Moratorium on Loan Repayment increased to RM66.6bn compared with RM62.8bn in previous week. A total of RM23.3bn was utilised by business sector (from RM21.9bn) and RM43.3bn utilised by the public (from RM40.8bn). As announced, after the end of the general moratorium period on 30 September 2020, banking institutions will assist borrowers affected by Covid-19 through targeted bank assistance. We believe this will continue to assist borrowers who lost their jobs and salaries due to Covid-19 pandemic. Separately, under BNM's SME Soft Loans Funds, banks have approved loans worth RM9.6bn for over 21,410 SMEs, an increase of RM0.2bn from 21,063 SMEs in previous week.

Ministry of Finance guided that the initiatives under PRIHATIN and PENJANA have started to display positive development as Department of Statistic (DOSM) recently announced unemployment rate in the country improved to 4.9% in June from 5.3% in May. The reopening of the economy, the incentives disbursed to protect businesses and employees seemingly has stabilised the labour market condition. We believe the government implementation measures to upskill workers and generate jobs through WSP under PRIHATIN and PENJANA, by providing incentives for hiring and training assistance under PENJANA will likely increase the employability of the unemployed. The programmes launched are estimated to benefit almost 200,000 youths and the unemployed. As for the update on the Wage Subsidy Programme, the applications approved increased to 2.6mn workers as at 31 July (2.58mn workers previously), where RM8.99bn had been approved (RM8.97bn in the previous week). This was equivalent to about 65% of the total RM13.8bn in WSP.

Another update was the measure to provide additional assistance to the people, where Bantuan Prihatin Elektrik (BPE), an assistance in the form of free electricity consumption up to 300kWh for 3 months during MCO. Domestic consumers who use electricity between 601-900 kWh per month will enjoy an additional discount of 10% (which is an additional 8% from the existing discount rate of 2%) from April 2020 to December 2020. As at 31 July, the value of BPE was RM566.6mn, where RM364.5mn has been utilised by individuals and RM202.1mn has been utilised by the business sector.

MOF recently tabled the Temporary Measures for Government Financing (Covid-19) Bill on the RM45bn allocated for the economic stimulus packages and programmes. The proposed Bill, if passed, will temporary raise government borrowing ceiling rate to 60% (from the current 55% of GDP), starting Feb 2020 and enforce until 31 December 2022. As on the economy, MOF expects country’s economy to be on track for recovery in 2021, but highlighted concern that if Movement Control Order (MCO) is re-implemented, this may lead to issues including disrupting efforts to revive the economy. Nevertheless, the Government will focus on measures and strategies, to be announced in the Budget 2021, to revive economy as well as restoring investors’ confidence.

Source: Affin Hwang Research - 12 Aug 2020