The government announced a fiscal package (PEMERKASA) on 17th March 2021 worth RM20 billion (~1.3% of GDP), of which RM11 billion is a direct fiscal injection from the government. This brings total fiscal assistance to RM340 billion over six packages since the start of the COVID-19 pandemic.
The package aims to jumpstart the economy with four focus areas and 20 initiatives. Key measures include higher allocations for the COVID-19 vaccine programme (RM2bil), cash handouts for the B40 households (RM1.2bil), wage subsidy extension (RM0.7bil), subsidies for smart device purchases for B40 households (RM0.5bil), grants and microcredit (RM1.6bil), small projects nationwide (RM2.5bil), and electricity bill discounts (RM135mil). Fuel subsidies worth RM3bil will also be spent to cap domestic fuel prices and manage inflation risks.
The latest fiscal package comes as new daily infections are on a downtrend, followed by easing of movement restrictions this month to support the economy. The additional support from PEMERKASA will help address concerns of lingering pandemic risks and uneven recovery. It also offers new initiatives to strengthen the country’s competitiveness with specific focus on attracting investments, boosting trade, and driving digitalisation. In line with this, UOB Malaysia maintains their 2021 GDP growth forecast of 5.0% (2020: -5.6%).
By Julia Goh
Senior Economist, UOB Malaysia