Malaysia Unveils $3.7 Billion Package as Covid Cases Surge
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Malaysia unveiled a 15 billion ringgit ($3.7 billion) package to help the economy weather the impact from a fresh surge in coronavirus cases.
The plan, which includes cash support to the poor, tax breaks and wage subsidies, will help bolster the existing initiatives aimed at helping people blunt the economic impact of the pandemic, Prime Minister Muhyiddin Yassin said in a televised address Monday.
The measures come a week after Malaysia declared a state of emergency, allowing the government to enact immediate laws to contain the pandemic and support the economy. The move had raised concerns about the government’s ability to stoke activity amid limited fiscal space and a relatively high debt load.
The package amounts to 1.1% of gross domestic product and the “relatively conservative amount is essentially a sign that fiscal space to do large-scale stimulus is limited,” said Wellian Wiranto, an economist at Oversea-Chinese Banking Corp. “Any impact on the overall budget deficit figure is likely to be contained.”
Malaysia is experiencing a fresh surge of Covid infections that has stretched its health system to the breaking point. The country recorded a record 4,029 cases Saturday and doesn’t expect to flatten the infection curve until May. The nation’s immunization plan is on track, with the first batch of vaccines set to roll out in early March, Muhyiddin said.
The emergency, which could last until Aug. 1, coincides with a two-week lockdown against the virus that led analysts to shave as much as 1.5 percentage points off their GDP forecasts for this year. While the government has said the economy will grow as much as 7.5% this year, regions under the new stay-at-home orders contribute more than two-thirds of GDP.
Muhyiddin said the impact of the targeted lockdown is still under control. “Growth will continue to be supported by strong exports sector and the global trade recovery,” he said.
The new package is necessary as the restrictions on movement are “expected to have a significant bearing on the economy,” said Mohd Afzanizam Abdul Rashid, chief economist at Bank Islam Malaysia Bhd. “Under the current circumstances, we can’t be dogmatic in respect to keeping the fiscal deficit in check. The present situation warrants swift and flexible approach.”
Malaysia’s key stock index, which was down 0.9% before the package was announced, extended the loss to 1.1% at the close in a third straight day of losses. The ringgit held earlier losses to trade 0.4% weaker at 4.0512 per dollar.
The economy shrank in the second and third quarters of 2020 -- fourth-quarter data isn’t out yet -- and the government was expecting the economy to contract 4.5% to 5.5% for all of last year.
The government last year announced 305 billion ringgit of relief measures -- more than 20% of GDP -- to spur the economy amid the pandemic, according to Muhyiddin. Those measures included 55 billion ringgit of direct stimulus, he said.
Highlights of the premier’s address include:
- The government to extend tax relief for covid-19 tests
- To expedite cash aid for 11.1 million recipients of the handout
- Cab, bus drivers to get one-off cash aid of 66 million ringgit
- Tax break for phone, laptop purchases extended to Dec. 31
- Tax exemption on locally-assembled cars extended to June
- The government set aside 2.2 billion ringgit for special charity
- All employers can apply for wage subsidy program
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