KUALA LUMPUR, March 22 (Bernama) – The government needs to pump an additional RM120 billion into the economic stimulus package to safeguard the country’s economy amid the current turmoil due to the COVID-19 outbreak and oil price collapse, the Malaysian Associated Indian Chambers of Commerce and Industry (MAICCI) said.
Secretary-general Datuk Dr A.T. Kumararajah said the package should be implemented in two stages: RM20 billion channelled towards the small and medium enterprises and maintaining the social security of the workers and RM100 billion for the rehabilitation of the economy.
“The recent RM20 billion stimulus package announced by the government was only 1.3 per cent of our gross domestic product (GDP) with the budget deficit only increasing by 0.2 per cent. It is not a big figure to combat this perfect storm.
“We thus have a capacity to add RM120 billion into the system over the next short to medium term, which is about nine per cent of our GDP,” he told Bernama.
Giving an example, Kumararajah said the allotted RM1.1 billion by the government to the Tourism, Arts and Culture Ministry to promote Visit Malaysia 2020 could be re-channelled to the stimulus package since this is a non-starter for this year.
Budget recalibration is also crucial, allowing the government to re-prioritise funds from low-impact development expenditure for usage under the stimulus package.
“The 2020 Budget had set aside RM56 billion towards development expenditure. This gives us room to manoeuvre,” he said.
He noted that the spread of COVID-19 has disrupted the global economy, and Malaysia, being a petroleum depending country, faces a huge loss when the benchmark Brent crude oil declines significantly.
At the time of writing, Brent crude has fallen to US$29 per barrel, down by 4.29 per cent.
“It is a double whammy, COVID-19 and the slump in oil price, and there is no way we will be able to take on that kind of onslaught without a proper plan. We must steward the number that we are showing for the next quarter and what is worse is we are not sure how long this COVID-19 will last,” he said.
Malaysia’s last stimulus package prior to this was announced in 2009 -- during the global economic recession -- with an allocation of RM60 billion over a two-year period.
“(Through the additional allocation,) in the next two years we can go into a rehabilitation phase to build the country’s economy back to where it should be and achieve the projected economic growth. We will come out from this COVID-19 situation,” Kumararajah said.
He, however, stressed that implementation is the key to navigate the package and welcome the Finance Ministry’s establishment of the Economic Stimulus Implementation & Coordination Unit Between National Agencies (Laksana) to monitor the implementation of the 2020 economic stimulus package.
Credit rating agency Moody’s Investors Service Inc lowered its 2020 GDP growth forecast for Malaysia to three per cent due to the implications of COVID-19 and the global oil price war on the country while Standard Chartered Global Research reduced its forecast to 2.5 per cent from four per cent.
Initially, the Malaysian government forecast a 4.8 per cent GDP growth for 2020; but earlier this month, Prime Minister Tan Sri Muhyiddin Yassin announced growth was expected to be lower by 0.8 to 1.2 percentage points.
StanChart, in its note, said its lower projections were based on a sharp, but brief, supply-chain disruption due to China’s restrictive coronavirus containment measures, which temporarily impacted local and external demand -- for example, through reduced tourism.
However, as it saw the disruption in China supply chain coming to an end, it also raised Malaysia’s 2021 GDP growth forecast to 4.8 per cent from 4.4 per cent.
Meanwhile, Kumararajah urged the government to recalibrate the 2020 Budget as the budget was drafted when crude oil was trading at US$62 per barrel compared to below US$30 per barrel now.
“Obviously, we need to work on a budget recalibration. The last time we did a budget recalibration was in 2016. The budget was tabled in October 2015 and due to the decline in oil price by 35 per cent, in January 2016 the government decided to recalibrate the budget while gross domestic product was revised down to 4.0-4.5 per cent from 4.0-5.0 per cent set earlier.
“And now (since the 2020 Budget tabling) the oil price has dropped by 50 per cent; therefore, we should recalibrate the budget immediately,” he said, adding that the country’s deficit is however going to balloon.
During the 2020 Budget, the government allocated a total expenditure of RM297 billion, of which 21.7 per cent would be derived from the oil revenue.
TAGS: MAICCI, Economy, COVID-19, Oil, 2020 Budget, Recalibration, Stimulus package