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Senior Economist Julia Goh and Economist Loke Siew Ting at UOB Group assessed the recent measures announced by the Bank Negara Malaysia (BNM).

Key Quotes

“A supplementary package worth MYR10bn was announced yesterday (6 Apr) to address some of the concerns raised by the small- and medium-sized enterprises (SMEs) as the effects of COVID-19 and the Movement Control Order (MCO) raise risks of business closures and job losses. The measures aim to provide financial relief for SMEs, to support businesses, and retain jobs during and post MCO.”

“The additional support includes a top-up of MYR7.9bn to MYR13.8bn for the SME wage subsidy scheme and special grants worth MYR2.1bn to benefit 700,000 eligible micro SMEs. The expanded wage subsidy scheme requires the SMEs to retain employees for six months and estimated to benefit 4.8 million workers. Other benefits include tax breaks for private landlords who offer at least 30% discounted rentals to small businesses for the period of Apr-Jun 2020, as well as a 25% reduction in foreign worker levies.”

“The additional spending brings the total stimulus package to MYR260bn (or 18% of GDP) to help mitigate the severe impact of COVID-19 and avert a sharper contraction in economic activity in 2020. Prior to this additional stimulus package for SMEs, Bank Negara Malaysia (BNM) estimated the stimulus measures under the Package 1 & 2 would add 2.8% pts to GDP. With the additional spending, the government’s direct fiscal injection will rise to MYR35bn, which would be funded through government funds and domestic borrowings. This will also raise the fiscal deficit target to 4.7% of GDP in 2020 (from 4.0% previously).”