Following a two-week full nationwide lockdown (1 – 14 June), PM Tan Sri Muhyiddin Yassin announced an additional RM40bn or 2.6% of GDP worth of fiscal measures under the PERMERKASA Plus aid package to cushion the effects on the economy. The package incurs RM5bn of direct fiscal spending, bringing cumulative direct fiscal injection to RM77.6bn since 2020 (out of seven fiscal stimulus packages totalling RM380bn). PEMERKASA Plus carries three objectives: 1) increasing the capacity of the public healthcare system, 2) continuing the Prihatin Rakyat agenda, and 3) supporting business continuity.
Key initiatives include increasing hospital bed capacity and extending contracts for healthcare workers, additional cash aid for low-income groups, one-month wage subsidies, extended electricity discounts for selected segments, targeted automatic loan moratorium or payment reduction for affected groups, extension of home ownership stamp duty exemption, and sales tax exemption for passenger vehicles until year-end. BNM will also raise its SME loan facilities by RM2bn to a total of RM7bn.
The latest fiscal measures are largely more targeted and aim to provide meaningful assistance to the hardest hit segments while managing the fiscal slippage as fiscal and debt targets look more vulnerable given the lower GDP outlook. We at UOB Malaysia have revised down our full-year GDP growth forecast to 4% for 2021 (from 5%) after factoring in the impact of the full lockdown. With the additional fiscal support, we expect Bank Negara Malaysia (BNM) to hold the policy rate unchanged. The next scheduled monetary policy meeting is on 7-8 July.