KUALA LUMPUR, Jan 19 — The RM15 billion PERMAI stimulus package unveiled by Prime Minister Tan Sri Muhyiddin Yassin yesterday will only have a minimal impact on the government’s fiscal position, said CGS-CIMB Securities Sdn Bhd.
While the government did not indicate direct fiscal injection from the PERMAI stimulus, the research firm estimated that the combined additional government expenditure incurred to be at no higher than RM2 billion or 0.1 percent of gross domestic product (GDP).
“We believe the government has sufficient room to maneuver within the scope of Budget 2021 and the budget deficit of 5.4 percent 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 today.
CGS-CIMB said PERMAI would likely not trigger an adverse market reaction to the government’s fiscal position.
However, it 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.
The research firm reckoned that the government’s response with 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 per cent during its Monetary Policy Committee’s (MPC) meeting today.
“With fiscal resources deployed, BNM may adopt a wait-and-see approach at its next MPC meeting, maintaining its current monetary policy stance while signalling strongly that it stands ready to ease further should risks 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.