• Government may be prepared to implement additional economic stimulus packages to support the economy, if necessary

• Under the Moratorium on Loan Repayment, the value of the moratorium increased to RM78.14bn as at 14th August, compared with RM74.3bn in previous week

• As for BNM's SME Soft Loans Funds, banks have approved loans worth RM10.2bn for over 22,322 SMEs, an increase of RM0.1bn from 22,143 SMEs in previous week

Domestic Demand Will Likely Recover in the Coming Quarters

Prime Minister Tan Sri Muhyiddin Yassin guided that Government may be prepared to implement additional economic stimulus packages to support the economy, if necessary. This could be related to the recent announcement of extension of the Recovery Movement Control Order (RMCO) from 1st September to 31st December 2020. As almost all sectors are resuming operations during RMCO, we believe the country’s domestic demand will likely recover in the coming quarters. However, tourism-related sectors will remain weak and may still be a drag on domestic demand in 2H20. Some SMEs in the tourism-related sectors could probably face some low cash inflow that will affect their future repayment ability. Nevertheless, Prihatin stimulus packages, such as loan moratorium, special assistance for SMEs, wage subsidies, electricity bill discounts and other initiatives will continue to support economic activity in 2H20. We believe any new stimulus measures will likely be unveiled in the Budget 2021 (to be announced in November 2020).

Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz mentioned that the quick decisions made by the government by giving out the stimulus measures to reduce the negative outcome of Covid-19 have reaped positive results. These were also reflected in economic indicators recently, such as in exports growth, unemployment numbers, manufacturing PMI and industrial production index (IPI). So far, the oneoff cash stimulus was at 96% success rate whereas wage subsidy, in the 3-6 months’ category was still at 51% implementation rate. FM further elaborated that some of the earlier stimulus measures are yet to run its full course.

This week, Ministry of Finance (MOF) highlighted that Moratorium on Loan Repayment increased by RM3.84bn to RM78.14bn as at 21 August, compared with RM74.3bn in previous week. As announced for the nineteenth update of the PRIHATIN and PENJANA stimulus packages, RM27.35bn was utilised by business sector (from RM26bn in previous week) and RM50.79bn utilised by the public (from RM48.3bn). Separately, under BNM's SME Soft Loans Funds, banks have approved loans worth RM10.2bn for over 22,322 SMEs, an increase of RM0.1bn from 22,143 SMEs in previous week. As SMEs are an important source of growth in the domestic economy, PENJANA emphasises on specific strategies to support SMEs by increasing access to financing to enhance their capabilities and capacity. Another measure in saving the local businesses is through PENJANA SME financing, as of 21 August 2020, a total of 1,172 applications have been approved, worth RM329.5 million. This is equivalent to 16% from the RM2bn allocation given.

Meanwhile, as for the update on the Empowering the People, Hiring Incentive Programme and Training Assistance, a total of 20,574 employees (an increase from 17,400 employees) have been successful in securing jobs since the commencement of the registration since 15 June 2020. For Bantuan Sara Hidup under Prihatin, a total 4.18mn recipients received payments amounted RM2.7bn in total. As for the details on the achievement of other initiatives can be found in the Appendix I and II.

Source: Affin Hwang Research - 3 Sept 2020