KUALA LUMPUR - Malaysia has announced a RM40 billion (S$12.8 billion) stimulus package for the economy, RM5 billion of which will be in the form of a direct fiscal stimulus by the government to soften the blow of another lockdown.
The announcement by Prime Minister Muhyiddin Yassin on Monday (May 31) came just hours before tougher restrictions were due to take effect to combat the latest and worst Covid-19 wave in the country.
He said: "As I have stressed before, the closure of economic sectors will have a huge impact on the nation's economy and the lives of the public. I want to be frank that the government has limited fiscal space to spend at this moment."
"Nonetheless... the government will do its utmost to ensure a balance between lives and livelihood... and ensure opportunities to earn a living for your beloved families."
The "Pemerkasa Plus" package includes RM2.1 billion in cash aid of up to RM2,500 for households with monthly incomes of RM5,000 or less, and a month of wage subsidies for affected sectors worth RM1.5 billion that will benefit 2.5 million workers.
Low interest financing worth RM3.5 billion was also announced, while the poorest 40 per cent, as well as small and medium-sized enterprises affected by the lockdown, will be able to choose between a three-month loan moratorium or 50 per cent reduction in instalments for six months.
Another RM1 billion will also be spent to boost healthcare services, including RM450 million to increase the capacity of stressed intensive care units in hospitals.
The lockdown - which allows only 17 economic sectors to operate with a strict work-from-home mandate - was announced last Friday, just days after Tan Sri Muhyiddin said such measures would be catastrophic for an economy that has recorded a full year of decline.
In an interview broadcast on state media, the Prime Minister said on May 23 that the government would need a package worth RM500 billion to offset the impact of a lockdown. Putrajaya has already spent RM60 billion in direct fiscal injections since the start of 2020 for stimulus plans.
Public finances are straining 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 unwilling to borrow further as it inches close to a self-imposed 60 per cent statutory ceiling, preferring instead to draw down on reserves and allow the public to cash out retirement savings.
Gross domestic product shrank 5.6 per cent last year and another 0.5 per cent dip was recorded in the first quarter of 2021. Most economists now believe official projections of up to 7.5 per cent growth, returning Malaysia to pre-pandemic economic levels, should be abandoned.
The tightened rules come after the third movement control order (MCO) imposed since the pandemic began last year failed to suppress the current surge in Covid-19 cases which has repeatedly smashed daily infection and death toll records.
More than 1,000 people died in May alone, and over 160,000 new patients, or 29 per cent of all-time infections, were reported.
The first MCO imposed in March last year saw the economy bleed RM2.4 billion each day. But despite being dubbed a full MCO, the latest lockdown, which will be in force till June 14, will not be as harsh as the authorities seek to avert the collapse of both the economy and a stretched healthcare system.
Mr Muhyiddin on Monday also disclosed that all ministers and their deputies would forego salaries for the next three months to help offset costs related to the pandemic.