AFTER the Prime Minister’s announcement of pumping an additional RM10 bil in the government’s new stimulus package, Maybank Investment Bank Research revised its 2020 and 2021 budget deficit forecasts for the country’s gross domestic product (GDP).
From a Sept 23 note, the research house announced its revised forecast to -6.7% (in 2020) and -6% (in 2021), from its previous -6.5% and -5.9%.
In the new stimulus package, the RM10 bil will be divided into three main segments, which includes RM7 bil for cash handouts to low- and middle-income groups via the Bantuan Prihatin Nasional 2.0 (BPN2.0), RM2.4 bil for the Wage Subsidy Programme 2.0 (WS2.0) and the remaining RM600,000 for special grant to micro enterprises known as the Geran Khas PRIHATIN 2.0 (GKP2.0).
“While the additional direct fiscal injection totalled RM10 bil, budget deficit will increase by RM2.53 bil, involving RM2.4 bil (WS2.0) and extra allocation of RM130 mil for GKP2.0 as these falls under development expenditure (DE), whereas the RM7 bil (BPN2.0) falls under operating expenditure (OE),” Maybank IB Research analyst Suhaimi Ilias said in the 23 Sept note.
“This is our understanding of how these measures are classified in the federal government budget under the earlier RM295 bil economic stimulus packages (from PRIHATIN and PENJANA, of which RM45 bil is direct fiscal injection,” he added.
Suhaimi also stated that Malaysia’s fiscal rules among other dictate that OE must be funded by revenue, thus budget deficit is primarily driven by DE and only DE can be funded via debt, but there has been no information as of yet on how the RM7 bil for BPN2.0 is funded. – Sept 26, 2020
