Malaysia unveiled a package of tax cuts, loan facilities and grants Thursday to offset the drag on its economy from the COVID-19 outbreak while cutting mandatory retirement contributions to boost consumption.
Mahathir Mohamad, Malaysia's interim prime minister, announced a 20 billion ringgit ($4.77 billion) fiscal stimulus program aimed at ensuring the "economic risks associated with the outbreak are effectively addressed."
While the centerpiece of a stimulus package announced Tuesday in Hong Kong was a planned HK$10,000 ($1,283) payout to each of the territory's 7 million adult permanent residents, Malaysia's version was more targeted, focused on buoying a domestic tourism industry bearing the brunt of the pain from efforts by China and neighboring countries to limit the spread of the virus.
Mr. Mahathir, in a speech, said the government would provide personal income tax relief of up to 1,000 ringgit for expenditures related to domestic tourism, exempt hotels from having to pay a 6% service tax and distribute a one-off payment of 600 ringgit each to taxi drivers, tourist bus drivers, tour guides and registered trishaw drivers, among a host of other measures.
To provide broader stimulus for the economy, Mr. Mahathir announced that the level of mandatory contributions the country's workers have to pay into the 924.75 billion ringgit Employees Provident Fund, Kuala Lumpur, the backbone of the country's retirement system, will be cut to 7% of salaries from 11% with effect from April 1 through the end of 2020.
The move "will potentially unlock up to 10 billion ringgit worth of private consumption," effectively offsetting the expected fall in Malaysia's exports due to disruptions to global supply chains resulting from the virus, said Mr. Mahathir.
The economic stimulus package should help the economy's growth for 2020 come in at the top of the 3.2%-to-4.2% range the government laid out, while the fiscal deficit should edge up to 3.4% of gross domestic product from the government's earlier target of 3.2%, he said.