• On the BPN 2.0, as of 26 October, around RM3.6bn was channelled to 7.32 million recipients
• Applications approved in the Wage Subsidy Programme (WSP) increased to 2.639mn workers as at 16 October, as compared to 2.638mn workers in previous week, where RM11.998bn was approved (RM11.996bn in the previous week).
• BNM's SME Soft Loans Funds as of 16 October, banks approved loans worth RM10.81bn for 23,234 SMEs, an increase of RM0.04bn from 23,196 SMEs in the previous week

Disbursement of BPN 2.0 expected to benefit 10.6 million recipients in total

In the latest 27th update of the stimulus packages, after the announcement of the KITA PRIHATIN on 24 September 2020, Ministry of Finance (MOF) highlighted on BPN 2.0 that around RM3.6bn was channelled to 7.32 million recipients as of 26 October 2020. This comprises 6.27 million recipients from the B40 category and 1.05 million from the M40 category. With a total allocation of RM7bn announced for KITA’s BPN 2.0, it is expected that the balance of RM3.4bn of cash assistance will be disbursed later to benefit 10.6 million recipients. We believe the KITA package and its measures will be an early preview of what to expect from Budget 2021 (to be presented on 6 November 2020), which will includes further extension of the proposals on targeted Wage Subsidy Programme, Special Prihatin Grant and Bantuan Prihatin Nasional (i.e. 3.0).

In the latest update, MOF also highlighted status of PENJANA and its implementation rate. In particular, applications approved in the Wage Subsidy Programme (WSP) increased to 2.639mn workers as at 16 October, as compared to 2.638mn workers in previous week, where RM11.998bn was approved (RM11.996bn in the previous week). The current approval to date was equivalent to about 74% of the total RM16.2bn overall allocation. Meanwhile as for measures to help SMEs through BNM's SME Soft Loans Funds as of 16 October, banks approved loans worth RM10.81bn for 23,234 SMEs, an increase of RM0.04bn from 23,196 SMEs in the previous week. Details on progress and achievement of other initiatives can be found in the Appendix I and II.

Following the further extension of enforcement of Conditional MCO (CMCO) for Selangor, KL and Sabah, from 28 to 9 November 2020, with Negeri Sembilan also seeing rising number of cases, there are concerns of possible deterioration in business activity, which may pose some downside risk for the economy, especially in 4Q20 and 1Q21. As a result, we expect other short-term measures in 2021 Budget to also focus on countering the negative effects of Covid-19 on certain sectors and industries affected, especially in the tourism-dependent retail industry. In tandem with the stimulus packages, with recent uncertainty surrounding the rising cases of COVID-19 domestically, we believe BNM may likely cut its OPR by 25bps from 1.75% to 1.5% in the MPC meeting on 3 November 2020, especially if the economy slows as more CMCO restrictions are being re-imposed.

We believe the support from both monetary and fiscal stimulus measures are still necessary for 2021, as Malaysia will have to rely more on internally generated growth from private consumption and investment to sustain economic growth, in the event that the external environment deteriorates unexpectedly.

In the Ministry of Finance’s (MOF) 2020-2021 Economic Outlook Report, which will accompany the Budget speech, we believe the Government may project the country’s real GDP growth to average and trend higher at around 5.5 to 8.0% for 2021 (from an official estimate of -3.5% to -5.5% in 2020), against our expectation of 6% for 2021 (-5% estimated for 2020)

Source: Affin Hwang Research - 28 Oct 2020