KUALA LUMPUR – The RM20 billion Strategic Programme to Empower the People and Economy (PEMERKASA) will generate a positive fiscal impulse to the economy in 2021 after having been negative in 2019 and 2020, RHB Investment Bank said, reported Bernama.
The fiscal impulse is defined as the difference in the current year fiscal stance minus the previous year’s fiscal stance of the country.
Chief economist Dr Sailesh K Jha said the policy measure provided some support to consumers and small and medium enterprises (SMEs) but did not alter the economic growth forecast for the first quarter and second quarter of 2021, at -2.6% and 16.4% year-on-year, respectively.
“We revise up our 2021 fiscal deficit forecast to 6% of gross domestic product (GDP) from 5.5%,” he said in the RHB Chief Economist Insights released yesterday.
He said this was in line with the Ministry of Finance’s guidance upwards revision to 6% from 5.4% recently due to the implementation of the PEMERKASA package on March 17.
Sailesh said the investment bank had also maintained its 2021 GDP growth forecast of 5.4% year-on-year versus the market consensus estimate of 5.5%.
“In our 2021 GDP growth forecast, the unexpected further loosening of fiscal policy via the PEMERKASA package announcement compensates for our previously held view of overnight policy rate (OPR) cuts by Bank Negara Malaysia, which we changed to a no OPR cut forecast on March 4, 2021,” he said.
Meanwhile, he said the fiscal impulse to the economy over the last decade had been negative due to the government embarking on a path of debt consolidation and limited usage of discretionary policy, which focused on inducing a positive impulse to the economy.
He added that similar to other emerging markets, the concept of fiscal impulse and its efficacy could be of lesser importance in Malaysia due to a variety of reasons.
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