KUALA LUMPUR (Jan 18): The government’s RM15 billion Perlindungan Ekonomi dan Rakyat Malaysia (Permai) assistance package is seen as a prudent move as it does not involve new funds and will be financed through reallocation of existing funds, according to economists.
UOB Malaysia senior economist Julia Goh told theedgemarkets.com that this move is prudent and prevents slippage of fiscal deficit targets.
“The scheme reiterates that the fiscal support is ongoing and builds on several existing measures to assist the people and businesses,” she added, noting that the Permai scheme also increased allocation for the Ministry of Health that recognises the severity of the Covid-19 pandemic situation.
On top of this, it also increases funds for the disaster relief programme amid the floods.
“As such, the scheme reaffirms the government’s continued policy support to sustain the growth recovery as the year progresses alongside the vaccination plan that is scheduled to begin by early March,” Goh said.
While the government does not expect the recently-imposed Movement Control Order (MCO 2.0) to have as big an impact as last year's partial lockdown, Goh pointed out that the government is, however, silent on its 2021 official growth target of 6.5%-7.5%, of which “much will depend on the pace of global recovery, the vaccination plan, and course of the pandemic”.
UOB has pencilled in a 25-basis-point overnight policy rate cut in the first quarter of 2021 as the pressure to ease may be lesser with the latest stimulus measures and government’s assessment that the economic impact from current MCO is more manageable.
“It is difficult to say whether the government has covered everything [in this stimulus package] because it is also quite mindful of its state of finances,” said Mohd Afzanizam Abdul Rashid, chief economist at Bank Islam Malaysia Bhd.
He noted that the current “very fluid” situation has resulted in announcements of economic stimulus becoming more regular, which he said “shows the severity of the current crisis”.
“It all depends on the success rate of curbing the virus spread and at the same time, the need to facilitate the economic recovery. It’s not an easy task,” said Afzanizam.
Nonetheless, he mentioned that the state of emergency may have ruled out one key risk factor that is the political instability. “So now, the government and its machinery can focus on breaking the infection chain and resuscitating the economy up until Aug 1."
Socio-Economic Research Centre executive director Lee Heng Guie concurred, saying that the key point from the Permai package emphasises on further enhancing and expediting on the current and ongoing relief measures from the previous packages and Budget 2021.
Lee noted that the Permai assistance package, together with the other packages announced last year and Budget 2021, could already do much in easing and assisting the people and businesses. “And I don’t think people should wait for more [new money/incentives],” he added.
Lee also lauded some of the government’s initiatives including the expansion of additional special grants to small and medium enterprises, as well as the rental and electricity rebates.
Last year, the government implemented four economic stimulus packages worth a combined RM305 billion, equivalent to more than 20% of gross domestic product, to assist the rakyat and businesses, as well as to safeguard the economy. Under Budget 2021, the government had allocated RM322.5 billion, which is the largest in the country's history.