IT was indeed ‘heart-touching’ to listen to Prime Minister Tan Sri Muhyiddin Yassin as he unveiled the RM15 bil Malaysian Economic and Rakyat Protection (PERMAI) assistance package that will be another shot in the arm for consumers and businesses to tide over financial hardship stemming from the re-imposition of the movement control order (MCO 2.0) and the declaration of a state of emergency (till Aug 1).
To echo PublicInvest Research, having five fiscal stimulus measures in less than a year are unprecedented, a move that aptly described the severity of the COVID-19 pandemic.
Putting all of PERMAI’s key objectives – and rhetorics aside – the number one question is probably where the RM6 bil direct fiscal injection (as projected by the research house) for PERMAI will be sourced from the 2021 budget allocation.
“A portion of the development expenditure (DE) may be sacrificed as it had been given a bigger allocation of RM69 bil (+48% year-on-year [yoy]), the largest ever by the Government,” suggested PublicInvest Resrarch in its latest strategic outlook.
“Its sizeable yoy jump suggests that the Government can afford to take some of its allocation for the PERMAI (circa 10% of DE allocation in 2021).”
This could be at the expense of various projects allocated under education, healthcare, housing, transportation and public utilities though greater clarity from the Government is needed to verify this, according to PublicInvest Research.
To re-cap, including PERMAI, the Government’s fiscal assistance programme for the five stimulus packages that have been rolled out to-date – Prihatin, Prihatin SME+, Penjana, Kita Prihatin and PERMAI – is worth a whopping RM320 bil or an equivalent of more than 20% of the country’s gross domestic product (GDP).
While the Government did not indicate its direct fiscal injection into the PERMAI stimulus package, CGS-CIMB Research estimated the combined additional Government expenditure “at no higher than RM2 bil or 0.1% of GDP”.
“We believe the Government has sufficient room to manoeuvre within the scope of Budget 2021 and the budget deficit of 5.4% of GDP to accommodate the additional spending,” opined economists Michelle Chia and Lim Yee Ping.
Moreover, if current global oil prices persist at US$56/barrel (vs Budget 2021 assumption of US$42/barrel), the research house expects the Government to collect an additional oil-related revenue of about RM4 bil, assuming a sensitivity of RM300 mil per US$1/barrel.
“As such, we do not expect PERMAI to trigger adverse market reaction to the Government’s fiscal position,” argued the economists.
“We believe (the) scope for significant fiscal expansion may be constrained by the Government’s debt ceiling and concerns over potential sovereign ratings action (following Fitch Ratings’ downgrade in December).” – Jan 19, 2021
