KUALA LUMPUR,Aug 17: Finance Minister Tengku Zafrul Aziz says the government is open to the idea of targeted stimulus measures if the situation warrants such an approach.
“The government will monitor the economic situation, and if necessary it will provide more targeted assistance,” he said.
For now, the Prihatin Rakyat Economic Stimulus Package (Prihatin) and National Economic Recovery Plan (Penjana), which are expected to contribute over 3% to gross domestic product (GDP) growth in 2020, remain ongoing, with their implementation closely monitored.
For now, Tengku Zafrul said, there were no plans for any stimulus packages.
“However, if certain segments of our society need assistance, we will continue to give assistance. My colleagues in the ministry and Cabinet are constantly going down to the ground to understand what is happening, and if there is a need to assist the people, we will be prepared,” he said in an interview with Bernama and TV3.
Tengku Zafrul also said there was still room for targeted initiatives.
“As I said before, the plan to increase Malaysia’s statutory debt limit to 60% of the GDP from 55% is part of the government’s RM45 billion direct injection into Prihatin and Penjana, and by the end of the year the debt ratio will slightly pass 55%.
“This means there is still room for targeted stimulus if needed,” he said, adding that the government wanted to ensure that the budget deficit was contained at between 5.8% and 6.0%.
The Prihatin and Penjana packages were worth RM295 billion, with RM45 billion in the form of direct fiscal injection by the government.
Bank Negara Malaysia (BNM) governor Nor Shamsiah Mohd Yunus said increasing the debt level during a crisis was nothing new as Malaysia had done it before.
Malaysia’s debt-to-GDP ratio was 80.7% in 1990 before falling to 31.8% in 1997.
It then rose to 41.4% in 2001 and increased to 52.8% in 2009. It remained above 50% from 2009 to 2018.
“The increase is temporary and the bank and government do have the capacity. Our interest rates have come down and borrowings are now much cheaper so the impact on the debt servicing ratio will also be less,” she said in a senior editors briefing last Thursday.
She said Malaysia had never had a problem servicing its debts, which were mainly ringgit-denominated.
On the 2021 Budget, Tengku Zafrul said the ministry was actively engaging with businesses, the people and NGOs.
“The discussions so far are on ways to change business models to face the challenges posed by Covid-19. The two areas in which it is crucial for the country to move forward are human capital and technology,” he added.
The 2021 Budget, to be tabled in Parliament on Nov 6, is aimed at revitalising the economy as well as restoring investors’ and consumers’ confidence.
BNM has revised its 2020 GDP growth forecast to -5.5% to -3.5% from -2.0% to 0.5% previously. The bank expects the economy to recover from the adverse impact of Covid-19 and post a growth of 5.5% to 8.0% in 2021.