Since mid-March 2020, the Malaysian authority has implemented several preventative measures and mobility restrictions in order to curb the spread of COVID-19, which has inevitably impacted small enterprises and low and middle-income Malaysians. The government response has been high spending on subsidies that are linked to the operating expenses resulting from four big economic stimulus packages that were introduced in the first half of 2020 with an aim to offset the COVID-19 economic shock towards small businesses and the local population. This week’s chart uses data from Bank Negara Malaysia and reflects the changes in Malaysia’s federal government operating expenditure in the first two quarters of 2020 in response to the current COVID-19 crisis.
- Despite the pandemic, Malaysia’s public finance remains healthy. The total federal government operating expenditure continues to be stable two quarters into 2020, and its second quarter expenditure has also exhibited a similarity to the 2019 level.
- While total government expenditure did not increase, government spending in the second quarter of 2020 has placed more emphasis on government aids and subsidies, and significantly reduced allocation to grants and transfers for state governments, public agencies and state-owned enterprises.
- High government spending on subsidies is linked to the operating expenses resulting from four big economic stimulus packages that were introduced in the first half of 2020 with an aim to offset the COVID-19 economic shock towards small businesses and the local population.
- With the resurgence of the virus and another wave of lockdowns in early November 2020, Malaysia’s aid and subsidy spending at the federal level is likely to remain high.