PUTRAJAYA: Malaysia’s interim Prime Minister Mahathir Mohamad on Thursday (Feb 27) announced an economic stimulus package worth RM20 billion (US$4.7 billion) to mitigate the country's economic impact due to the COVID-19 outbreak.
He said the stimulus package is targeted at tackling the impact of the outbreak, catalysing people-based growth, and encouraging quality investment.
Several plans have also been lined up to ensure Malaysia's economy will continue to be on the right track to sustainable growth, he said.
The economic stimulus package was announced as scheduled despite a political crisis which saw the Pakatan Harapan government lose its majority in Parliament.
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Malaysia has reported 22 positive cases of COVID-19 so far. Twenty of the patients have fully recovered.
Approximately 80,000 people have been infected with the disease worldwide with more than 2,800 deaths recorded mostly in China.
Dr Mahathir said the most immediate economic impact of COVID-19 has been the sharp decline in tourist arrivals throughout the region as hotels, airlines, travel companies and more broadly the tourism-dependent retail industry have been badly affected.
To mitigate the impact, the government will take a three-pronged approach – first, to ease the cash flow of affected businesses; second, to assist affected individuals; and third, to stimulate demand for travel and tourism, Dr Mahathir said in announcing the 2020 Economic Stimulus Package themed “Bolstering confidence, stimulating growth and protecting jobs”.
The government has proposed several measures for a six-month period starting April.
These include deferring the monthly income tax instalment payments for businesses in the tourism sector and allowing the affected companies to revise their profit estimates for 2020 with respect to monthly income tax instalment payments without penalty.
A 15 per cent discount on monthly electricity bills was also proposed for hotels, travel agencies, airlines, shopping malls, conventions and exhibition centres.
Moreover, Human Resource Development Fund levies will be exempted for hotels and travel-related companies. Hotels will also be spared from the 6 per cent service tax between March and August 2020.
In addition, the government, through Bank Negara Malaysia (BNM) and Bank Simpanan Nasional (BSN), will offer financing facilities to affected companies.
BNM will provide a special relief facility worth RM2 billion, particularly in the form of working capital for small and medium enterprises, at an interest rate of 3.75 per cent.
Meanwhile, BSN will allocate a RM200 million microcredit facility that offers an interest rate of four per cent. In addition, the approval process for existing loan funds, such as Bank Pembangunan's Tourism Infrastructure Fund of RM1.5 billion, will be further streamlined.
Dr Mahathir said that to bolster business confidence, the government is committed to sustaining public investments and will expedite the tenders and implementation of development expenditure projects this year.
In addition, government-linked companies (GLCs) and agencies will accelerate planned investment projects for 2020 which involve a total investment of RM21 billion.
GLCs such as Tenaga Nasional Bhd will invest RM13 billion this year, including hastening projects such as LED street lights, transmission lines and rooftop solar installations.
Meanwhile, the Energy, Science, Technology, Environment and Climate Change Ministry will open bids quota of 1,400 MW for solar power generation, which is expected to involved RM5 billion of private investments and create 25,000 jobs.
Thirdly, the Malaysian Communications and Multimedia Commission will implement up to RM3 billion on works related to the National Fiberisation and Connectivity Plan.
The government also plans to promote higher value-added private sector investments, including through a co-investment fund of RM500 million to be co-invested and matched by private investors on a ratio of at least one to three, which will raise the total fund amount to RM2 billion, for investment in early-stage and growth-stage Malaysian companies.
In 2003 Malaysia faced a similar situation when the SARS outbreak hit East Asia. This played a role in dampening growth from 7.1 per cent in the third quarter of 2002 to 4.6 per cent in the same quarter a year later.
“However, as a result of the comprehensive economic stimulus package, the Malaysian economy recovered to 6.5 per cent in the fourth quarter of 2003,” Dr Mahathir noted.
He said due to the global economic scenario and COVID-19 impact, Malaysia's GDP growth in 2020 is estimated to range from 3.2 per cent to 4.2 per cent.
Earlier this month, BNM said the virus outbreak will affect the country's economic growth for this quarter.