Malaysia pumps in extra fiscal stimulus – UOB

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting reviewed the latest announcements by the Malaysian government.

Key Quotes

“The government announced additional initiatives under the “KITA PRIHATIN” package worth MYR 10bn on 23 Sep. This is in addition to the PRIHATIN, PRIHATIN SME Plus, and PENJANA measures announced in Mar-Jun worth MYR 295bn. Since then, there were also enhancements to electricity subsidies, extension of loan moratorium and repayment assistance on targeted basis to support the recovery and stimulate the economy. With the latest announcement, this brings the total fiscal package to ~MYR 305bn-310bn or 21% of GDP.”

“New measures announced are: 1) Bantuan Prihatin Nasional (BPN) 2.0 with MYR 7bn of additional cash aid; 2) Wage Subsidy Program 2.0 worth MYR 2.4bn to extend the wage support measures until end-Dec that will benefit 1.3 million employees; and 3) MYR 0.6bn of Special Prihatin Grant 2.0 for micro businesses.”

“We think these measures would be partly funded by unutilized allocations from other initiatives and possibly financed under Budget 2021 given that some of the measures carry through into Jan 2021. This will help cap the 2020 fiscal deficit target under 6.5% of GDP. The debt-to-GDP ceiling has been raised to 60% (from 55% previously), leaving room for additional MYR 75bn of government borrowings to fund the initiatives.”