KUALA LUMPUR: Malaysia will fork out some of nearly RM2 trillion in its institutional funds to finance a RM20 billion stimulus package to fend off the impact of the coronavirus (Covid-19) outbreak.
Interim Prime Minister Tun Dr. Mahathir Mohamad said the bulk of the funds were held thrugh the likes of the Employees Provident Fund, Bank Negara Malaysia and Lembaga Tabung Haji.
“All of them own big savings. In the case of EPF, it has almost RM1 trillion but there are other savings that can be used to pay for the (stimulus package),” Dr Mahathir said at the unveiling of the stimulus package here yesterday.
He was asked on whether the government would issue bonds to fund the package.
Meanwhile, economists said the package was a strategic maneuvering and part of the government’s expansionary fiscal policy.
They added that the package reflected the government’s intent to maintain macroeconomics stability.
“Macroeconomics stability brings economic confidence and that is where investors, not only local but also global investors, are analysing the economy at the macro level. So sophisticated and smart investors are moving to those countries where government has got money,” Juwai IQI Global chief economist Shan Saeed told the New Straits Times.
Shan said the government still has a lot of room to pursue expansionary fiscal and monetary policies.
In the monetary policy context, he expects Bank Negara Malaysia to cut its Overnight Policy Rate (OPR) to 2.5 per cent soon.
“Bank Negara still has room to cut down the discount rate by 50 basis points. I would not be surprised if the discount rate goes down to 2.25 per cent this year.
“We are heading for lower discount rate regime globally. More and more central banks globally are lowering the discount rate to stimulate growth, to bolster growth and economic trajectory,” he added.
Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the size of the fiscal stimulus of RM20 billion was more than expectation as the bank expected to be about RM15 billion.
He said the package was well targeted with emphasis on the affected sectors namely tourism-related industries as well as to ensure the viability of the economy in the long run.
The government, he said, had also set a reasonable gross domestic product (GDP) growth target of 3.2 per cent to 4.2 per cent for 2020 as the economy was expected to be affected in the first half of 2020.
He said consequently, the fiscal deficits are expected to widen from the initial target of 3.2 per cent to 3.4 per cent in 2020.
“All in all, the measures are timely and well targeted. Expansionary fiscal policy should be able to provide the right support to the economy alongside with the accommodative monetary policy adopted by the central bank. We are positive on the announcement,” Afzanizam added.