• Recent KITA Prihatin stimulus package worth RM10bn will bring positive impact to country’s economic growth towards 4Q20.
• Total direct fiscal injection by the Government now amounted to RM55bn or about 3.7% of GDP, where Malaysia's fiscal deficit target will likely rise by another 0.5-0.7 percentage points (ppt) to 6.3-6.5% of GDP estimated for 2020, from an earlier projection of 5.8-6.0% of GDP.
• WSP assistance was originally extended additional of 3 months to end September 2020 under PENJANA, has now further extended by between 3- 6 months under KITA Prihatin (known as the Targeted Wage Subsidy Programme 2.0).

Recent Economic Stimulus Packages Will Bring Positive Impact in 4Q20

Finance Minister (FM) Tengku Zafrul guided that the recent Prihatin Supplementary Initiative Package (KITA Prihatin) worth RM10bn will bring positive impact to country’s economic growth towards 4Q20. The package announced by Prime Minister Tan Sri Muhyiddin Yassin last week, is an extension of the previous economic stimulus packages (Prihatin, Prihatin SME+ and PENJANA), which together will total RM305bn (or about 20.7% of GDP) of stimulus packages and contributing 3.7 to 4.0 percentage points (ppt) to GDP growth this year. FM further guided that multiplier impact and effect from the stimulus measures implemented will put the country’s growth in better position for economic recovery 2021 as well. With additional RM10bn announced for KITA Prihatin, the total direct fiscal injection by the Government now amounted to RM55bn or about 3.7% of GDP. We expect Malaysia's fiscal deficit target will likely rise by another 0.5-0.7 percentage points (ppt) to 6.3- 6.5% of GDP estimated for 2020, from an earlier projection of 5.8-6.0% of GDP.

In the latest 23rd update of the PRIHATIN and PENJANA stimulus packages, applications approved in the Wage Subsidy Programme (WSP) increased to 2.627mn workers as at 18 September, as compared to 2.626mn workers in previous week, where RM11.93bn was approved (RM10.44bn in the previous week). This was equivalent to about 86.4% of the total RM13.8bn allocation. Human Resource Minister recently said that WSP has benefitted 150,000 companies that may have helped in the reduction of unemployment rate in the country from a high of 5.5% in May to 4.7% in July. The WSP assistance was originally extended additional of 3 months to end September 2020 under PENJANA, has now further extended by between 3-6 months under KITA Prihatin (known as the Targeted Wage Subsidy Programme 2.0). A total of 1.3 million employees estimated to benefit from this subsidy with an allocation of RM2.4bn.

Other updates included measures to help SMEs increase funds in order to provide access in alleviating short term cash flow burdens, where BNM's SME Soft Loans Funds as of 18 September, banks have approved loans worth RM10.6bn for 22,925 SMEs, an increase of RM0.1bn from 22,822 SMEs in the previous week. Further measures to assist local businesses are through PENJANA SME financing where, as of 18 September 2020, a total of 3,058 applications have been approved (from 2,566 in the previous week), worth RM742.8mn (RM639.6mn in the previous week). This was equivalent to 37% from the RM2bn allocation.

As at 18 September, Moratorium on Loan Repayment increased by RM3.84bn to RM93.44bn, compared with RM89.6bn in previous week, where a total of RM32.7bn was utilised by business sector (from RM31.4bn in previous week) and RM60.74bn utilised by the public (from RM58.2bn). As government continue to monitor the latest developments and ensure banking institutions assist households and businesses during this challenging period, with some borrowers requiring extension of moratorium, we believe more applications for extension by banking institutions will be approved from October. Details on progress and achievement of other initiatives can be found in the Appendix I and II.

Source: Affin Hwang Research - 30 Sept 2020