KUALA LUMPUR – Prime Minister Tan Sri Muhyiddin Yassin unveiled the RM15 billion PERMAI stimulus package with only have a minimal impact on the government’s fiscal position, said CGS-CIMB Securities Sdn Bhd, reported Bernama.
The research firm estimated that the combined additional government expenditure incurred to be at no higher than RM2 billion or 0.1% of gross domestic product (GDP), while the government did not indicate direct fiscal injection from the PERMAI stimulus.
“We believe the government has sufficient room to maneuver within the scope of Budget 2021 and the budget deficit of 5.4% of GDP to accommodate the additional spending.
“Moreover, if the current global oil prices persist at US$56 per barrel versus the Budget 2021 assumption of US$42 per barrel, we estimate that the government could collect an additional oil-related revenue of about RM4 billion, assuming a sensitivity of RM300 million per US$1 per barrel,” it said in a note on January 19.
CGS-CIMB said PERMAI would not trigger an adverse market reaction to the government’s fiscal position.
Nevertheless, it is believed that the scope for significant fiscal expansion might be constrained by the government’s debt ceiling and concerns over potential sovereign rating action, following the recent downgrade by Fitch Ratings.
Besides that, the research firm reckoned that the government’s response with the PERMAI stimulus package forestalled the urgency for monetary easing by Bank Negara Malaysia (BNM), therefore it expected the overnight policy rate (OPR) to be kept unchanged at 1.75% during its Monetary Policy Committee’s (MPC) meeting.
“With fiscal resources deployed, BNM may adopt a wait-and-see approach at its next MPC meeting, maintaining its current monetary policy stance while signaling strongly that it stands ready to ease further should risk to the economic recovery fester.
“Should the Movement Control Order (MCO 2.0) persist for a protracted period, we see the possibility of the central bank cutting the OPR further in the first half of 2021,” it added.