Stimulus will widen fiscal gap to 3.4%, GDP growth forecast for 2020 revised down to 3.4%-4.3% from 4.8%
by ALIFAH ZAINUDDIN/ pic by MUHD AMIN NAHARUL
MALAYSIA unveils a RM20 billion stimulus package to prevent further economic fallout as the coronavirus outbreak continues to send global economies into a tailspin.
The comprehensive package comprises tax exemptions, tariff rebates and cash handouts to cushion the economy, which is reeling from the US-China trade wars, a plunge in tourist receipts and stuttering demands for products and commodities.
Malaysia becomes the latest country to inject capital into the economy after Singapore’s S$5.6 billion (RM16.9 billion), Indonesia’s US$748.55 million (RM3.15 billion) and Hong Kong’s (US$15.4 billion) relief packages.
Interim Prime Minister (PM) Tun Dr Mahathir Mohamad (picture) said although the package will widen the country’s fiscal gap to 3.4%, a reduction of employees’ contribution to the pension fund, cash handouts and rebates would boost consumer spending.
The additional liquidity in the market would help businesses and households survive during this critical period, said the interim PM.
“The government is introducing the economic stimulus package 2020 to ensure the risks related to the outbreak can be tackled effectively,” he said in Putrajaya yesterday.
The administration is already calculating the cost of Covid-19. It has revised the GDP growth forecast for this year to between 3.4% and 4.3% from the previous 4.8%.
Malaysia is looking at consumer spending to help float the economy. The Employees Provident Fund’s (EPF) contribution by employees will be slashed by 4% from the mandatory 11% to 7%, effective April 1 until the end of 2020.
“This will potentially unlock up to RM10 billion worth of private consumption,” Dr Mahathir said, adding that Malaysia has savings of almost RM2 trillion.
“We will make use of some of these savings. Some are with Lembaga Tabung Haji, Bank Negara Malaysia (BNM), the EPF…all of them hold big reserves. And in the case of EPF, it is almost RM1 trillion,” Dr Mahathir said.
Bantuan Sara Hidup recipients will also receive their payment of RM200 two months ahead of schedule, with an additional RM100 to be credited into their bank accounts in May. Subsequently, an extra RM50 will be channelled in the form of e-tunai.
The financial aid is expected to start from April.
The tourism, aviation and retail sectors, which have been badly impacted by the coronavirus, will receive a large sum from the package. These sectors are granted tax relief, flexible loan repayments and rental reductions.
The government will also provide financing facilities including RM2 billion from BNM in the form of working capital for small and medium enterprises at an interest rate of 3.5%.
The Health Ministry will spend RM150 million to purchase the necessary equipment and medicine to contain the deadly flu virus, which has killed more than 2,800 people worldwide.
Health officers will receive a special monthly critical allowance of RM400 effective February 2020 until the outbreak is contained.
The Ministry of Finance (MoF) is expected to increase procurement threshold value for balloting from RM50,000 to RM100,000, and for quotations from RM500,000 to RM800,000 to be carried out by the first quarter of 2020.
“MoF will oversee the compliance to procurement schedule to ensure projects are undertaken on a timely basis,” Dr Mahathir said.
He said the government is committed to sustaining public investments to bolster business confidence.