Is The RM20b Stimulus Package Enough?

To offset the fallout from Covid-19, the previous Government had prepared a RM20 billion stimulus package. The highlights are as follows:

·       Bank Simpanan Nasional (BSN) provides RM200 million micro credit at 4% interest rate

·       MAHB to cut rental for tenants, landing charges and parking fees at airports

·       Postponement of income tax monthly installments for income tax allowed for tourism-related companies

·       Bank Negara Malaysia provides RM2 billion guaranteed financial aid for SMEs at 3.75% interest rate

·       All banks are required to reduce monetary burden in the form of postponement of payments or rescheduling of loans

·       Temporary six months discount of as much as 15% for electricity bills for hotels, tourism agencies, airlines, and shopping centres

·       Hotels to get service tax breaks from March 2020 to August 2020

·       Minimum EPF contribution by employees to be reduced by 4% from 11% to 7%, with effect from Apr 1 to Dec 31, 2020. This will potentially unlock up to RM10 billion worth of private consumption. Malaysian workers have the option to opt out from the scheme and maintain their contribution rate

·       A payment of RM200 to all Bantuan Sara Hidup (BSH) recipients scheduled for May 2020 will be brought forward to March 2020. An additional RM100 will be paid into the bank accounts of all BSH recipients in May 2020. Subsequently, an additional RM50 will be channelled in the form of e-tunai

·       Grants of RM1,000 to RM10,000 for local entrepreneurs to promote the sale of their products on e-commerce platforms

·       Securities Commission Malaysia and Bursa Malaysia will waive listing fees for one year, for companies seeking listing on Leading Entrepreneur Accelerator Platform (LEAP) or Access, Certainty, Efficiency (ACE) markets, as well as companies with market capitalisation of less than RM500 million seeking listing on the Main Market

·       Import duty and sales tax exemption on importation or local purchase of machinery and equipment used in port operations for three years commencing 1 April 2020.

The key driver is the hope of higher consumption/domestic demand with the reduction of EPF contribution by employees. This presumes employees will unleash higher disposable income on goods/services produced. That may not happen, people are more cautious in a crisis!

Many were hoping for immediate relief on tax payments not deferments for 12 months; rental subsidies for tourist-related companies and mall tenants; transportation sector subsidies including e-hailing services, train/commuter passengers; grants for hoteliers to survive low occupancy and tax credits for employers to retain staff over next six months.

The total package had to be 2% of 2019 GDP or around RM30b. That may take our overall fiscal deficit above the stated target but these are exceptional times. A decisive push would have changed the dismal outlook by the private sector. This is an opportunity for the new Government to make that difference.

Reference:

Highlights of RM20bil stimulus package, The Star, 27 Feb 2020