KUALA LUMPUR: The government's RM20 billion additional economic stimulus package under the Program Strategik Memperkasa Rakyat dan Ekonomi (Pemerkasa) will provide some support to overall consumption spending affected by the pandemic, analysts said.
The latest stimulus package, which was announced just two months after the RM15 billion Permai package, would mitigate the adverse economic impact from the Covid-19 pandemic, they added.
Affin Hwang Investment Bank Bhd said Pemerkasa, which comprised 20 initiatives, would revive economic activity, with measures to support economic growth, business and targeted assistance to people and sectors still affected by the pandemic.
"In terms of supporting the labour market, we believe the retention of jobs will be assisted by additional allocation of RM700 million for the Wage Subsidy Programme 3.0," Affin Hwang said in a report today..
The wage subsidy programme will be extended for another three months especially for the tourism sector, wholesale and retail trade as well as businesses that closed during Movement Control Order. This is expected to help 400,000 employees and 37,000 employers.
Public Investment Bank Bhd (PublicInvest) said Pemerkasa initiatives were more targeted at rendering assistance to those severely affected by the on-going pandemic such as the B40 group, tourism sector and SMEs.
"The fiscal injection from the Pemerkasa worth RM11 billion is almost one-fold higher than the Permai package (RM6.6 billion)."
PublicInvest said Pemerkasa would mitigate the adverse economic impact from Covid-19 which remains a recurring issue for the country, although the situation was not unique to Malaysia.
"The full rollout of six fiscal stimulus packages this year will see the nation entering a recovery period in the first half before growth to pick-up in pace in the second half which underpins our unchanged 6.2 per cent gross domestic product (GDP) projection for the year," the firm added.
Besides Pemerkasa and Permai, the government had announced four other stimulus packages in 2020 namely Kita Prihatin (RM10 billion), Prihatin (RM250 billion), Prihatin SMEs (RM10 billion) and Penjana (RM35 billion).
In total, the stimulus measures introduced have now amounted to RM340 billion or about 21.7 per cent of GDP, based on government's 2021 forecast.
Measures under Pemerkasa included an increase in allocation for the immunisation programmes from RM3 billion to RM5 billion
The government also provided a one-off cash assistance of RM500 for the B40 group who had lost their income as well as an additional RM500 to Bantuan Prihatin Rakyat recipients with an income of less than RM1,000.
"We believe that this effort will continue to support private consumption in the coming months led by a sustained recovery in economic activity on the back of gradual easing of movement restrictions as roll out of vaccines continue," said Affin Hwang.
The cash assistance has a total allocation of RM1.2 billion and aimed to benefit 2.4 million recipients.
The government has already begun the first phase of the earlier BPR payments involving RM1.93 billion to 8.45 million recipients at the end of February this year.
Affin Hwang said the country's fiscal deficit target to be slightly higher in 2021 but manageable.
"The stimulus packages will likely add to Malaysia's real GDP growth. We believe this will lead to slightly higher fiscal deficit position for 2021.
"However, taking into consideration that government's revenue will benefit from higher global oil prices, with current Brent crude oil higher compared to US$42 a barrel assumed in 2021 Budget, we believe any increase in country's budget deficit position will likely remain manageable."
Affin Hwang said the budget deficit target might increase to 6.0 per cent of GDP in 2021, compared to 5.4 per cent of GDP projected in the 2021 Budget.
"The likely higher fiscal deficit projection was partly due to the announced plan to fix the RON95 petrol price at a ceiling price of RM2.05 per litre and diesel at RM2.15 per litre, where the government is likely to pay close to 30 sen per litre in subsidies."
The firm said the fuel subsidy would be roughly about RM3 billion based on current oil prices, offsetting some of the gains from government oil-related revenues from higher global oil prices.
Since November 2020, the Brent crude oil prices have increased from US$47.59 per barrel to about US$67.50 per barrel currently.
"We are currently maintaining our full year 2021 GDP growth forecast at 6.0 per cent compared to -5.6 per cent for 2020, due to further fiscal stimulus respond.
"We expect real GDP growth to improve and turn positive from the second quarter of 2021 onwards supported by better external demand from expansion in global growth, ongoing fiscal stimulus and monetary policy measures, as well as expected rollout of vaccines to lift business and consumer sentiments," Affin Hwang added.