Stimulus Package Introduced to Add Approximately 1.4% Points to Malaysia’s GDP Growth

The Global Economy Is Taking a Hit, and The Introduction of This Package Will Change That

Economies around the globe have taken a hit and the Malaysia Government hopes the new stimulus package will boost the country’s 2020 GDP growth.

The package is worth RM20 billion and it is estimated that it will add about 1.4% points to Malaysia’s 2020 gross domestic product (GDP) growth. The government has also revised the country’s budget deficit for GDP2020 to 3.4% from the initial 3.2%.

Stimulus Package Is Necessary

Global economics have taken a hit since the COVID-19 pandemic and Malaysia is no different. The introduction of this package is meant to help the country handle the impact while ensuring the economy remains as stable as possible.

The country’s macroeconomic developments will continue to be monitored by sovereign rating agencies. As long as Malaysia’s economic fundamentals remain strong, there is a good chance the outlook of the sovereign rating will remain stable. As of now, it is still too early to predict how severely the COVID-19 will impact macroeconomies.

The government believes that if this stimulus package is implemented correctly, Malaysia’s aggregate domestic demand can be strengthened. This is especially true for private sectors that have been impacted the most like travel, hotel, airlines, and tourism related sectors.

It is likely that Bank Negara Malaysia (BNM) will be cutting its overnight policy rate by 25 basis points for 2020 too. Since Asia-Pacific is the most hard-hit region of the COVID-19, neighbouring countries like Indonesia, Philippines, and Thailand have also taken the necessary rate cuts. With China being a major trading partner for most of the economies in this region, there is no doubt the COVID-19 ripple effect will be felt by other countries too.

Malaysia is taking measures to improve the situation moving forward with measures that include expanding fiscal stimulus and accommodative monetary policy measures. These measures should support local demand and consumer spending.