Eight and counting …will PEMERKASA serve as the magic pill?

ONE wonders if the Malaysian economy is on track to an ultimate recovery with the doling out of the eighth ‘nice sounding’ economic stimulus package in the form of a RM20 bil PEMERKASA – the second for 2021.

The latest package entails direct fiscal injection of RM11 bil or 0.7% of the country’s gross domestic product (GDP).

The previous packages which all coincidentally begin with the letter “P” and together totalled RM340 bil since 2020 include PERMAI (RM15 bil; Jan 2021), KITA PRIHATIN (RM10 bil; September 2020), PENJANA (RM25 bil; June 2020), PRIHATIN SME+ (RM10 bil; April 2020) and PRIHATIN (RM250 bil; March 2020).

CGS-CIMB Research sees four key highlights from the latest stimulus package:

  • Additional RM2 bil for the vaccine procurement budget to accelerate the completion of mass immunisations to December 2021;
  • RM6.7 bil towards fuel subsidies, B40 cash transfers and assistance, and more targeted wage subsidies;
  • Extensions of tax relief/incentives to tourism and retail, as well as a 10% discount on electricity bills for selected industries; and
  • Broad measures to facilitate productivity-enhancing investments and shift to new income streams, thus alleviating financing constraints for firms while boosting the labour market.

“After factoring in incremental revenue from higher oil prices, we estimate the budget deficit to widen to 6.1% of GDP in 2021 from the Budget 2021 target of 5.4% of GDP,” projected head of research Ivy Ng Lee Fang in a strategic report.

The research house further expects three key positive takeaways which will boost market sentiment, namely:

  • The Government plans to achieve herd immunity among the people by December 2021 instead of 1Q 2022. Thus far, over 5.6 million people have registered for vaccination and over 300,000 of them have been vaccinated;
  • The Government will likely not impose nationwide and statewide movement control order (MCO) any more to contain the COVID-19 pandemic. Instead it plans to use a more targeted approach based on locality and by focusing on related clusters; and
  • The Government will consider allowing inter-state travel in stages and may establish a special green lane for border travel that involves air transport.

“These, coupled with the steady decline in new COVID-19 cases in Malaysia to 1,219 (on March 17) from a peak of close to 5,700 new cases are positive as it suggests that the country is on a recovery path,” opined Ng.

“This will lower future potential corporate earnings risks due to COVID-19 disruptions.”

Nevertheless, CGS-CIMB Research expects the PEMERKASA package to be broadly neutral for corporate earnings.

“The incentives provided for the tourism sector in the form of wage subsidy, exemption of tourism and service taxes and others should help lower operating costs for hotels and mall operators, benefitting REIT players and the Genting group,”  reckoned the research house.

Meanwhile, the higher allocation for small-scale construction projects to RM5 bil from RM2.5 bil will benefit small contractors.

Moreover, the Government plans to raise the allocation from RM150 mil to RM300 mil for e-wallet credit under the e-Belia programme which will drive e-wallet penetration and total processing value (TPV) for e-wallet service providers like GHL Systems Bhd.

“We gather that the 10% discount offered on electricity bills which was extended to April-June 2021 from January-March 2021 for six sectors could cost RM135 mil and Tenaga Nasional Bhd’s contribution will be limited to a max of 10% of the total which works out to only RM13.5 mil minimal relative to its earnings base of RM5 bil for FY2021,” added CGS-CIMB Research. – March 18, 2021


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