KUALA LUMPUR, June 1 — The direct fiscal injection from the RM40 billion stimulus package Pemerkasa+ is set to widen the fiscal deficit for the year but it can be managed without hurting the fiscal bottom line, research firms said.
They said the direct fiscal injection of Pemerkasa+ was only at RM5 billion, the smallest thus far compared to Pemerkasa worth RM11 billion and the Permai package (RM6.6 billion).
In a note, MIDF Amanah Investment Bank Bhd expects the size of fiscal deficit to be around 6.1 per cent of gross domestic product (GDP) this year.
“This takes into account the direct fiscal impact from the fiscal stimulus packages introduced this year, such as both Pemerkasa and Pemerkasa+.
“Despite the limited fiscal space, an increase in fiscal spending is needed to strengthen the national healthcare system and mitigate the impact of lockdown on the economy,” it said, citing the plan for fiscal consolidation could be resumed later when the pandemic is under control and the economic recovery is more stable and sustainable.
Pemerkasa+, announced yesterday, was the seventh support package to help mitigate the adverse impact from the latest wave of Covid-19 infections and reimposition of stricter movement controls.
This brought the government’s overall aid tally to RM380 billion, equivalent to around 23 per cent of GDP.
Public Investment Bank Bhd meanwhile pointed out that there were no details given by the government on how Pemerkasa+ would be financed, whether through an increase in borrowing or a re-prioritisation in spending like in Permai.
It said the government stated that its fiscal resources are stretched amid a continuous rollout of fiscal aids since last year which has already entered its seventh tranche.
“The latest package is less generous than before though we think the government is prioritising its resources towards accelerating the Covid-19 vaccination programme which is the safest bet to revive the economy.
“The government is expected to hasten the community vaccination programme, and if all goes well — herd immunity is a reasonable target by year-end, if not earlier,” it said.
Meanwhile, RHB Investment Bank Bhd said Pemerkasa+ would have limited impact on its fiscal deficit projection and is thus maintaining it at 6.0 per cent of GDP for 2021.
While the government admits that the fiscal space is becoming more limited, the investment bank believes there are still avenues for the government to shore up its finances.
It identified several ways the government could do so, such as repurpose some of the 2021 budget allocation towards Covid-related measures.
“The RM69 billion development expenditure, the highest ever, can be redirected. Similarly, the unused allocation from other Covid-19 measures under Budget 2021 can be repurposed,” it said.
The government could also utilise the rest of the Kumpulan Wang Amanah Negara fund which has a balance of RM15 billion left for any extreme measures, after RM5 billion have been tapped so far for vaccine procurement. — Bernama