Kenanga: Still more room for another fiscal stimulus injection

KUALA LUMPUR: The government has room to inject another fiscal stimulus to prop up the growth momentum while ensuring extra social security for the people in weathering the challenging economic environment, according to Kenanga Research.

It said the government may want to consider additional cash transfer, especially for the bottom 40% income households (B40) and expand it to the middle 40% income households (M40).

“This will be faster and effective to partly lift the financial burden of the rakyat, as well as small businesses and spur spending during the period of turmoil. This may entail an additional RM3 bil to RM5 bil,” the research house said in a note today.

The Finance Ministry yesterday announced additional measures aimed at assisting individuals and small and medium enterprises (SMEs) to cope with the adverse impact of the Covid-19 pandemic.

The measures include special financing of up to RM1 mil without collateral under the special assistance facility to the SMEs affected by the coronavirus outbreak.

The facility is part of the allocated RM3.3 bil under Bank Negara Malaysia’s special fund for SMEs announced earlier.

“The measures are expected to provide some relief to SMEs, which contributed a large chunk of employment in the country at 66% of the country’s employment and 38.3% of Malaysia’s gross domestic product (GDP),” said Kenanga Research.

Meanwhile, the affected individuals with the existing insurance policy will be assured with hospitalisation facility and extension in their insurance coverage.

The government, via the Securities Commission and Bursa Malaysia, also reaffirmed that the capital and financial markets would continue to operate in a transparent and orderly manner.

Meanwhile, to ease taxpayers’ difficulties, the Inland Revenue Board of Malaysia extended the deadline for income tax returns for both online and manual submission to June 30, 2020.

“The firm view that the additional measures deemed to be right on time amid rising concerns among citizens and SMEs as public movement and businesses are restricted within the two-week Movement Control Order (MCO) which ends on March 31, as the number of Covid-19 cases continues to rise.

“This may lift up sentiments and provide additional relief to the affected individuals and businesses,” it said.

The research house reckons the measures outlined by the government would not affect the fiscal balance sheet as the financial institutions and insurance companies will absorb the stimulus.

Therefore, Kenanga Research retains its fiscal deficit forecast of 4.3% of the country’s GDP for this year amid the low Brent crude oil price which was currently trading at below US$30 per barrel.

“Likewise, we are still maintaining our GDP growth forecast for this year to moderate by 3.1% (2019: 4.3%) as we foresee a growth rebound in the second half of the year as the Covid-19 outbreak passed and stimulated by tech upcycle and improvements in the domestic demand and investment climate,” it said. – March 20, 2020, Bernama

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