He said although the final impact of the COVID-19 outbreak remains uncertain at this juncture, as it continues to spread across the world, Malaysia can be counted as among the first few nations to mount a stimulus package.
“This would provide some early growth insurance to the Malaysian economy. The economic stimulus package is well-targeted as it incorporates most widely reported suggestions to assist the affected sectors, (as well as) boost domestic tourism and domestic consumption,” he told Bernama.
Yeah, who is also Malaysian Economic Association deputy president, added that the projected widening of the fiscal deficit from 3.2 per cent to 3.4 per cent of GDP is also within the expected range, and importantly, within Malaysia’s fiscal capacity.
Commenting on the matter, Bank Islam chief economist Dr Mohd Afzanizam Abdul Rashid said the expansionary fiscal policy should be able to provide the right support to the economy alongside the accommodative monetary policy adopted by the central bank.
He said measures addressed in the economic stimulus package would ensure Malaysia remains on a strong foundation and economic viability in the long run.
For example, the government would provide financing facilities for affected companies; the deferment of income tax monthly installment for six months, a special discount of 15 per cent on electricity bills and exemption on Human Resource Development Fund levy for six months.
“Also, the Employees Provident Fund members’ contribution rate will be reduced from 11 per cent to seven per cent until the end of this year and a one-off cash payment for employees of tourism-related industries would sustain consumer spending which made up more 50 per cent of our economy,” Mohd Afzanizam said.
The economic stimulus package is anchored on three strategies, namely mitigating the impact of COVID-19, spurring rakyat-centric economic growth and promoting quality investments.
On the economic growth, Afzanizam said for the first half of 2020, the economy is expected to be affected due to the global economic scenario and COVID-19 impact.
Meanwhile, AxiCorp chief market strategist Stephen Innes said in the wake of Singapore and Hong Kong’s stimulus packages, the market is viewing the RM20 billion package in a positive light to confront the insidious COVID-19.
“The government needed to step up as the central bank cannot dampen the supply side disruption caused by COVID-19, so far more effective than an interest rate cut.
“At this point, it is a bit unclear how investors will eventually react to the larger deficit, but I think investors and credit agencies will look through the increase as these are unusual times and the government needed to put fiscal prudence on the backburner,” Innes said.
The economic stimulus package themed “Bolstering Confidence, Stimulating Growth & Protecting Jobs” was announced by Interim Prime Minister Tun Dr Mahathir Mohamad in Putrajaya today.
The announcement of the package was the second one for Dr Mahathir after 2003 when he, as Malaysia’s fourth Prime Minister, tabled an RM8.1 billion economic package to deal with another global health-related crisis, the Severe Acute Respiratory Syndrome (SARS).