Malaysia announces $ 12.8 billion stimulus package ahead of blockade, SE Asia News & Top Stories

KUALA LUMPUR – Malaysia has announced a stimulus package of RM 40 billion (S $ 12.8 billion) for the economy, of which RM 5 billion will be in the form of a direct fiscal stimulus from the government to soften the blow of another blockade.

The announcement by Prime Minister Muhyiddin Yassin on Monday (May 31st) came just hours before tougher restrictions would take effect to fight the latest and worst Covid-19 wave in the country.

He said: “As I have pointed out before, the closure of economic sectors will have a major impact on the nation’s economy and public life. I want to be honest that the government has limited fiscal space to spend on this. moment, “he said. “However … the government will do its best to ensure a balance between life and living … and to provide opportunities to earn a living for your beloved families.”

The Pemerkasa Plus package includes RM 2.1 billion in cash assistance of up to RM2,500 for households with a monthly income of RM 5,000 or less, and one-month wage subsidies for the affected sectors worth RM 1.5 billion that will benefit 2.5 million workers.

Low interest rate financing of RM 3.5 billion was also announced, while the poorer 40 per cent, as well as small and medium-sized enterprises affected by the blockade, will be able to choose between a quarterly loan moratorium or reduction 50 percent in installments for six months.

Another RM 1 billion will also be spent to increase healthcare services, including RM450 million to increase the capacity of stress intensive care units in hospitals.

The blockade – which allows only 17 economic sectors to operate under a strict house-to-house mandate – was announced last Friday, just days after Tan Sri Muhyiddin said such measures would be catastrophic for a one-year-old economy. complete decline.

In an interview broadcast by state media, the prime minister said on May 23 that the government would need a package worth RM 500 billion to offset the impact of a blockade. Putrajaya has already spent RM 60 billion on direct fiscal injections since the beginning of 2020 for stimulus plans.

Public finances are strained due to rising deficits as the government spends to support a shrinking economy that is returning less revenue to the Treasury.

The government has been reluctant to borrow further as it is close to a 60 percent imposed legal ceiling, preferring instead to take reservations and allow the public to take away pension savings.

Gross domestic product shrank 5.6 percent last year and another 0.5 percent decline was recorded in the first quarter of 2021. Most economists now believe official growth forecasts of up to 7.5 percent, bringing Malaysia back to economic levels parapandemic, should be abandoned.

The tightening rules come after the third Motion Control Command (MCO) imposed since the pandemic began last year failed to suppress the current wave in Covid-19 cases, which has repeatedly broken daily infection records and number of deaths.

More than 1,000 people died in May alone, and over 160,000 new patients, or 29 percent of all-time infections, were reported.

The first MCO imposed in March last year without a bleeding economy of RM 2.4 billion every day. But despite being called the full MCO, the latest blockade, which will be in effect until June 14, will not be as severe as authorities seek to avoid the collapse of the economy and an expanded healthcare system.

Mr Muhyiddin on Monday also revealed that all ministers and their deputies would waive salaries for the next three months to help offset pandemic-related costs.