Malaysia Ramps Up Support for Virus-Hit Economy to $58 Billion

(Bloomberg) --

Malaysia announced billions of dollars in fresh support for an economy punished by the coronavirus pandemic.

Prime Minister Muhyiddin Yassin said Friday the government was unveiling 250 billion ringgit ($58 billion) in support for the economy. That figure includes a 20-billion ringgit package announced last month by the previous government, as well as other measures presented since then, Muhyiddin said.

“We are a nation at war with invisible forces. The situation we are now facing is unprecedented in history,” Muhyiddin said. “This government may not be the government that you voted for. But I want all of you to know that this government cares for you.”

Malaysia joins governments around the world who have pledged trillions of dollars to support their economies as activity grinds to a halt to stop the pathogen. Its new measures come after Singapore announced $33 billion in stimulus on Thursday and India announced a $23 billion spending plan to counter the virus blow the same day.

Malaysia Ramps Up Support for Virus-Hit Economy to $58 Billion

Malaysia’s new steps “reflect a coordinated effort not just from the government, but also other government-linked entities and other financial institutions which will do much of the heavy lifting,” said Winson Phoon, head of fixed-income research at Maybank Kim Eng Securities Ltd. in Singapore. “These measures are growth-supportive, and certainly will help alleviate some of the pressures on both people and businesses.”

The ringgit was down 0.35% to 4.3463 per dollar as of 5:07 p.m. in Kuala Lumpur. Government bonds rose across the curve.

Malaysia’s government has extended a national lockdown to April 14 as the country struggles with the highest number of infections in Southeast Asia. The army has been deployed to ensure people stay home, while overseas travel is banned and schools and most businesses have been closed since March 18. As of Friday Malaysia had more than 2,000 confirmed cases of Covid-19, the disease caused by the virus, with 24 deaths.

Malaysia Ramps Up Support for Virus-Hit Economy to $58 Billion

Policy makers have unveiled a number of measures to cushion the effects of the pandemic, which is punishing the tourism and services sectors. Earlier this week Muhyiddin said Malaysians could withdraw as much as 500 ringgit a month from their retirement savings, while Bank Negara Malaysia instructed banks to offer loan deferrals. The central bank has cut its policy rate twice this year, by a total of 50 basis points.

The fiscal support now on offer -- which Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid estimated at 17% of GDP -- dwarfs the measures Malaysia took during the global financial crisis, when the government passed 67 billion ringgit of stimulus. In Friday’s speech, Muhyiddin didn’t announce any change to the forecast for 3.6%-4% economic growth this year or a fiscal deficit equal to 3.4% of GDP.

Among the measures announced Friday are:

  • 50 billion ringgit to guarantee working capital loans
  • 10 billion ringgit in one-time payments for singles and low- to middle-income households
  • 1 billion ringgit to ensure sufficient food supply
  • Discounts of as much as 50% on electricity tariffs for six months
  • Free Internet while movement remains restricted
  • 5.9 billion ringgit to ensure low-earning workers aren’t dismissed
  • Tax exemption on bank profits earned during a six-month loan moratorium announced earlier

“It’s all pretty sensible stuff, with the focus on protecting cash flow of the lower-income and middle-class groups at a critical juncture,” said Wellian Wiranto, an economist at Oversea-Chinese Banking Corp. in Singapore.

But, he added, with the government suggesting that only about 10% of the total will come from fresh fiscal injections, “I’m still slightly puzzled as to how the rest will be funded.”

©2020 Bloomberg L.P.

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