KUALA LUMPUR: Analysts expect the government to introduce a stimulus package of between RM5 billion and RM10 billion next week to mitigate the negative effects of coronavirus (covid-19) outbreak.
MIDF Research analysts Muhd Zafri Zulkeffeli and Mazlina Abd Rahman said the stimulus package would be focussing on export-oriented sectors and healthcare sector.
"The support could be in the form of tax cut, higher investment incentives, subsidies and direct cash to the rakyat," they said in a thematic report published recently.
MIDF further said it would be timely for the government to announce a stimulus package amid the coronavirus (covid-19) epidemic and a lower gross domestic product (GDP) growth at 4.3 per cent for 2019.
“Malaysian economy has to be supported by domestic expenditure particularly via private consumption, investment and government spending,” they added.
The research firm said keeping inflationary pressure at bay thru lower retail fuel prices and reduction in toll charges would indirectly spur domestic spending.
"We also expect the government to announce reduction in employee’s contribution to Employees Provident Fund from 11 per cent to 8.0 per cent, similar precedence of 2016,” it said.
MIDF Research said the government's investment segment is predicted to bound to positive growth after nine-straight quarters recording contraction.
"Moving forward, we opine the effects of Covid-19 to wane by second-quarter of 2020 as fatality rate is lower than recovery rate. Plus, the fatality rate is lower than Severe Acute Respiratory Syndrome (SARS), below 3.0 per cent levels."
MIDF also noted that weak crude oil prices will likely pressure Malaysia’s economic growth as the country is an export-oriented economy.
ASLI Centre of Public Policy Studies Chairman Tan Sri Ramon Navaratnam said the national budget has been running deficits for several years.
“Therefore, it cannot be depended upon to adequately stimulate the economy, to counter the weakening business and especially the small businessmen and women and growing unemployment and underemployment,” he said.
Navaratnam said the government’s economic stimulation package might have serious limitations as to how much it can do help businessmen, and to prevent more damage to the economy and the welfare of particularly the poor and more vulnerable Malaysians.
“The package cannot be strong nor too weak. It has to be moderate and affordable. The government cannot be expected to provide much more because of the continuing budget constraints and the lack of sufficient high savings of our reserves to meet, the uncertainties and hazards of rainy days and storms ahead, like we now face,” he said.
Navaratnam said the economic package should provide priority to the small and medium enterprises (SMEs) and to the low income groups.
“The bigger business can be helped by reducing uneven business practices in tenders and contracts and interference in their awards.
“We could also reduce rates and charges for the SMEs and the poor by lowering fees and charges, utility rates and more subsidies and loans to SMEs,” he added.
Meanwhile, Singaporean government recently announced financial packages worth around US$4.5 billion to tackle the coronavirus outbreak in the city-state and weather its economic impact.
This includes the deferment of hike in the goods and services tax until 2021 given the current state of the economy which recorded its lowest growth in a decade last year.
Singapore has also cut its 2020 growth forecasts due to an expected economic blow from the coronavirus outbreak and has flagged the chance of a recession this year.
Source: New Straits Times