Summary:
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.
Highlights:
- 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.
Article By Doris Liew Wan Yin
Graphic By Shu En LEE
ACI Perspectives 
One response to “Chart of the Week December 11, 2020: Malaysia’s Federal Government Expenditure”
The 2020 pandemic has disproportionally hurt company earnings in cyclically-oriented sectors, but the global growth recovery of 2021 should help close this gap, in our view. We expect consumer discretionary and industrials to realize the sharpest earnings rebound. Meanwhile, the strength of info tech and health care may continue to have a growing influence on US equity earnings. Markets fell this past week as increased odds of a no-deal Brexit and unresolved sticking points from the US fiscal stimulus talks dominated headline news. The US and European equity markets initially rose following the FDA vaccine advisory board’s positive recommendation for Pfizer, but finished off erasing earlier gains. Weaker clinical trial results from other vaccine candidates and rising US jobless claims dampened the market outlook. The S P 500 earnings per share (EPS) contributions by sectors. “2019” refers to actual EPS contributions by sectors while “2020E” and “2021E” data reflect estimates from Goldman Sachs Global Investment Research. The economic and market forecasts presented herein are for informational purposes as of the date of this presentation. There can be no assurance that the forecasts will be achieved. Please see additional disclosures at the end of this presentation.
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