I was hoping to start this #SaveMoneyWithHann web series on a more positive note. Unfortunately, we as a nation are facing an unprecedented (and never before seen) situation in our health, economy, business, and personal money matters.
Malaysia is sadly, but correctly shutting down movement and businesses from March 18 to May 12 (so far). The fact that Malaysia partially locked down the country before the Covid-19 situation got even worse is a testament to the relative preparedness of healthcare system that we have (globally we can see how each country is dealing with this, some worse than others).
Unfortunately, the Movement Control Order of March-May 2020 will have a devastating and terrible impact on jobs, income and financial positions of many Malaysians.
Covid-19 recession? How bad can it be?
In short, bad. Previous “financial crisis” events, while definitely bad, were not on a scale close to this. Where the Asian Financial Crisis 1997-1998 was a regional (Asian countries) crisis, and the Dotcom 2001 or the Global Financial Crisis 2008-2009 were sector-driven crises (the tech and financial sectors respectively), the Covid-19 pandemic affects every single major sector of the economy (tourism, retail, manufacturing, etc.), and every single country in the world (180+ countries are impacted heavily).
I could get into the economic specifics and data points backing my statement above, but more importantly we looking at a terrifying outlook, where we’d face at least 12 months of:
- job losses and unemployment
- business insolvencies (most people say bankruptcies)
- bearish investor (eg. stock market) returns
To ease the situation, the government announced the RM250 billion Prihatin Rakyat Economic Stimulus Package on 27 March 2020, followed up with an extra RM10bn a week later for SMEs. This was RM230+10 billion of new stimuli to add to the RM20 billion package announced by Interim Prime Minister Tun Dr. Mahathir Mohamed on 27 February 2020.
What is the Prihatin Rakyat Economic Stimulus Package 2020?
It’s basically a RM250 billion fiscal, financial, and monetary package aimed at responding to the economic and financial damage of the Covid-19 crisis affecting the national economy, local businesses, and of course, the rakyat.
Was it good enough? Well, at RM250bn, it amounts to roughly 17% of our country’s GDP, and is supposedly one of the largest in the world.
My amazing editorial team led by Pang has been working round the clock to list down and analyse each line item of the package, to give everyone a good sense of what it means for each one of our readers, and you may check them out here.
RM250 billion stimulus?! How can the Government afford this?
It’s a little complicated, but there is something that all countries have to manage which is their budget deficit. It is the difference in the spending (eg. schools, hospitals, civil service salaries, #Budget2020 goodies etc.) and income (taxes, investment income, petroleum dividend etc.) of a country.
If a country spends more than they earn in a year, this is a budget deficit which has to be funded by loans issued out by the government (our government has set a self-imposed limit of 55% of GDP for total debt/loans outstanding).
In general, developing economies such as Malaysia don’t have as much leeway to increase their debts compared to developed ones (where debt-to-GDP ratios can exceed 100%) because of investor concerns on default. Malaysia’s is currently is at 52.5% but this is likely to go up as a result of the Prihatin stimulus package to somewhere between 55% – 59% depending on how the economy fares in 2020.
However, if the government itself raised spending by RM250 billion (~17% of GDP) in the stimulus package, we would have increased that level by way more (ie. even 70%+), but the actual fiscal spend by the government is actually only RM25 billion, with the rest coming from other parties such as EPF via individual contribution reductions and withdrawals (RM41 billion), BNM for the 6-month loan moratorium (RM100 billion), and other GLCs/agencies (such as TNB, PTPTN etc.).
Are you affected? These are the financial aid schemes you may be eligible for
At times like these, it is crucial to know what assistance the government has to offer. The Prihatin stimulus package has something to offer for consumers and businesses alike, and here’s a breakdown of the most important ones:
For Employees & Households (including B40 / M40 groups)
- Bantuan Prihatin Nasional (BPN) – Direct cash payments in April and May 2020 to households and individuals in the B40 and M40 groups:
- RM1,600 – to B40 households earning RM4,000 monthly and below
- RM1,000 – to M40 households earning between RM4,001 and RM8,000 monthly
- RM800 – to B40 individuals earning RM2,000 monthly and below
- RM500 – to M40 individuals earning between RM2,001 and RM4,000 monthly
- Bantuan Sara Hidup (BSH) – Direct cash payments to individuals above 40 years earning less than RM2,000 monthly, and B40 households (additional to BPN).
- RM200 in March
- RM100 in May
- RM50 in the form of e-Tunai
- PTPTN loan repayment holiday
- 1.5 million borrowers will have loan repayments postponed until 30 September 2020
- Bank Negara Malaysia (BNM) – 6-month moratorium for consumer loans and 36-month credit card balance conversion
- 6 months deferment for Home Loans, Personal Loans and Car Loans from April – September
- Here’s why you should take it regardless of your financial situation.
- Credit Card Conversion to Term Loans – try not to take this one unless you really have to. My suggestion would be to take all the other deferments first and see if you can pay off your credit card with the installment savings.
- TNB Household discounts
- up to 50% discount off electricity bill for all households
- Free Internet & Data from Telcos
- 1GB daily free from the 4 major telcos
- EIS for Employees forced on unpaid leave
- RM600 monthly for 6 months from March 2020
For Self-Employed, Frontliners & Students
Cash payments to various groups:
- RM500 for e-hailing drivers
- RM400 per medical frontliners (Doctors, Nurses etc.)
- RM200 for all other frontliners (Military, Police, Customs, RELA etc.)
- RM200 for students in IPTA / IPTS / Form 6
For SMEs & Corporates
- SME Financing Schemes
- Special Relief Facility (SRF) – up to RM1 million at 3.5% p.a. (flat).
- Agrofood Facility (AF).
- SME Automation & Digitalisation Facility (ADF).
- 0% Microcredit interest for TEKUN – RM10,000 per loan.
- Wage Subsidy Programme
- RM600 per month to keep employment of workers up to salaries of RM4,000 monthly for Large Businesses (200+ employees);
- RM800 per month to keep employment of workers up to salaries of RM4,000 monthly for Medium Businesses (76-200 employees);
- RM1,200 per month to keep employment of workers up to salaries of RM4,000 monthly for Small Businesses (1-75 employees);
- All provided the company makes no retrenchments, unpaid leave, or salary cuts for 6 months from the start of the subsidy applied.
- Applications start with SOCSO from 9 April 2020.
- Grant for Micro SMEs
- One-off RM3,000 grant to micro-enterprises (no definition yet, but my guess would be sole proprietors and businesses with 1-5 employees, SME Corp defines it as such and adds RM300,000 annual sales as a maximum).
- BNM Loan Moratorium
- 6 months deferment for Property Loans, Term Loans and hire purchase agreements from April – September 2020.
- Here’s why you should take it regardless of your financial situation.
- Additionally, licenced money lenders (not under BNM’s purview) are encouraged to offer the same 6 month moratorium.
- EPF – Employer Advisory Services
- The EPF will offer advisory services to businesses affected by Covid-19, including suggestions of government aids to keep staff employed and help businesses stay afloat.
- HRDF levy exemption for 6 months
- Exemption on the 1% from April to September 2020.
- RM50 bilion Danajamin – minimum RM20 million for businesses
- Mainly for Larger Corporates
- TNB tiered discounts – for 6 months:
- 50% discount for electricity use less than 200kW
- 25% discount for electricity use between 201kW to 300kW
- 15% discount for electricity use between 301kW to 600kW
- Rental exemption for GLC-linked buildings, with a call for private landlords to do the same to enjoy a tax deduction equal to the rent deduction for 3 months.
- Foreign worker levy reduction by 25% for all ending between 1 April and 31 December 2020.
- SSM document submission extension for 30 days for all who were supposed to submit documents (annual returns etc.) during the MCO.
Survive Financially And Then Realign
Despite being an unprecedented amount, is the RM250bn stimulus enough? It’s hard to say, but given the damage done to the economy, I certainly hope so. What’s more important is that our government needs to react quickly to the science (on the health side) and the data (on the economic side, such as unemployment rates etc.).
Whether you’re an individual, an SME or a household, all our focus should be on getting through not just the disruption to our lives from the MCO, but also as we go into a post Covid-19 world.
Next week, I’ll be sharing some thoughts on surviving and adapting to a post-MCO Malaysia, and some ideas and tips on where to start, where to optimise financially, and how to get through this tough financial time.