|Malaysia Analytical Update | March 27, 2020
Authors: Kim Yaeger, Emma Tabatabai, Tina Jamaluddin, Alberto Coria, Nick Zuroski
Malaysia Unveils New COVID-19 Stimulus Package
On March 27, the Malaysian government released a massive $58 billion stimulus package to address the economic headwinds created by the spread of COVID-19 in Malaysia and around the world. The funding allocated for the new package by newly appointed Prime Minister Muhyiddin Yassin dwarfs that of former Prime Minister Mahathir Mohamad, who diverted $4.8 billion toward economic stimulus measures at the end of February. In a statement, Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz announced that Malaysia will fund the package through a combination of money from government coffers and borrowing. These measures are expected to expand the budget deficit to 4% from the 2020 3.2% forecast from the October Budget, accounting for COVID-19’s economic fallout and new oil prices.
The plan commits $23.1 billion to support businesses through income tax determents and a $693 million soft loan facility focused on small and medium-sized enterprises (SMEs). For employees who earn less than RM4,000 per month and employers that have experienced an income decrease of more than 50%, the government is offering an RM600 monthly wage subsidy for three months to ensure retainment in impacted sectors. To inject RM10 billion in cash flow for over 480,000 SMEs and businesses, the government plans to introduce a special program allowing employers to restructure, postpone, or reschedule mandatory Employees Provident Fund (EPF) contributions. Furthermore, all sectors will be exempted from the Human Resource Development Fund (HRDF) levy for six months beginning in April.
The package targets domestic investment activities such as small projects, infrastructure development, and facilities rehabilitation to spur job creation, with RM2 billion allocated for projects focused on improving road conditions and disinfecting community institutions. To decrease the financial burden of utilities for businesses and households alike, Tenaga Nasional BHD has set aside RM150 million to provide six-month tiered electricity bill rebates starting April 1. The government also established that major national Budget 2020 projects, including ECRL, MRT2, and the National Fiberization and Connectivity Plan (NFCP) will continue in pursuit of sustainable economic development.
On the consumer side, citizens are expected to receive $2.3 billion in assistance, with approximately RM10 billion distributed via one-time payments to the M40 and B40 groups in a series of payout stages, according to Prime Minister Muhyiddin. Specifically, 4 million households earning less than RM4,000 a month will receive RM1,600 one-time payments, unmarried individuals ages 21 and older earning up to RM2,000 will receive one-time payments of RM800, while unmarried individuals with earnings between RM2,001 and RM4,000 will receive one-time assistance of RM500. Residents of public housing units will not be required to pay rent for six months, entailing approximately $690 million in housing assistance from the government. In addition, RM600 million will be diverted toward the provision of free internet service for Malaysians from April 1 until the end of the Movement Control Order (MCO).
The package also allocates $231 million for a food security fund. On the healthcare front, the government plans to throw $374 million at the Healthy Ministry for necessary equipment and use of external health experts. Prime Minister Muhyiddin specified that insurance and takaful firms will set up an RM8 million special fund to cover COVID-19 screening costs at the cost of up to RM300 per policy for individuals instructed by the Health Ministry to undergo a test. Additionally, life insurance and family takaful companies will allow three-month deferments on premium payments or contributions for individuals facing financial pressure from the outbreak. On April 1, healthcare workers will receive an increased RM600 special allowance, while security officials enforcing the MCO will receive a special RM200 allowance.
Domestic Media Reactions
"Highlights of Malaysia's Economic Stimulus Package," The Edge Markets