PETALING JAYA: The latest round of stimulus measures valued at RM40 billion or 2.6% of the GDP, dubbed Pemerkasa+ to mitigate the impact of the full movement control order, has elicited mixed responses from analysts as it balances between affected sectors, the B40 demographic and constrained fiscal space.
The seventh fiscal package saw the smallest direct fiscal injection thus far at RM5 billion, compared with RM11 billion and RM6.6 billion fiscal injection from the previous Pemerkasa and Permai packages.
Despite a RM40 billion price tag, CGS-CIMB perceived the Pemerkasa+ package as underwhelming as it comprised largely liquidity and credit assistance of RM35 billion against a RM5 billion fiscal injection.
“With the budget deficit expected to breach 6% of GDP in 2021, the government is caught between the rock of a persistent Covid-19 wave and the hard place of fiscal reticence,” it said in a report today.
The research house estimated the six-week Phase 1 and 2 lockdown starting June 1, 2021 will lower Malaysia’s GDP growth in 2021 to 4.4% from 5.7% previously. It pointed out each passing fortnight of Phase 1 will cost a further 0.9%, hence the stakes are high for Malaysia to make this full lockdown the final one, while ramping up progress on vaccinations.
“We expect Bank Negara Malaysia to hold fire on the overnight policy rate, especially if the transition to Phase 2 goes as scheduled in two weeks.”
While TA Research applauded the measures, it found nothing new as most of them had been announced previously. It opined that it is matter of increasing the allocation amount or extending the current measures/aid from past packages to a certain period of time.
“While the recent stimulus package would offer some help, we believe it is not enough to mend the damage. We project the extra RM5 billion direct injection from this Pemerkasa+ package would increase our fiscal deficit by 0.3%-point, ceteris paribus, bringing it to -6.3% of GDP for this year,” said TA Research.
MIDF Research, however, opined that the initiatives unveiled by Pemerkasa+ are within its expectations and pointed out that the measures under the package will help businesses to sustain their operations and ease some pressure on their cash flow and initiatives such as the wage subsidy programme will also limit the rise in layoffs during the lockdown.
With the two stimulus packages introduced this year and its revised GDP projection, the research house estimated Malaysia’s fiscal deficit to be at 6.1% of GDP for 2021.
PublicInvest Research surmised that the less generous than before stimulus package is due to the government’s decision to prioritise its resources towards accelerating the Covid-19 vaccination programme, which is the safest bet to revive the economy.
Despite the knock-on effect from the latest containment measures, it expects the Malaysian economy to return to some form of normalcy in the second half of the year due to the vaccination efforts which will reach their peak in June and July.
