Malaysia was ranked No.35 on World’s Gross Domestic Product (GDP) Ranking in 2019. Malaysia is a small country from an economic perspective and yet Malaysia rolled out a bold, timely and targeted stimulus package in combat of Covid-19 outbreak and Movement Control Order (MCO). Developed countries like Australia’s fiscal stimulus, is 11% of its GDP, while Singapore has allocated 10.9% of its GDP. United States, meanwhile, is rolling out a USD2 trillion stimulus package, which is worth 10.5% of the country’s GDP.

The combined value of both stimulus package ESP-1 and ESP-2 at RM250 billion (USD 58.14 billion) is substantial at 15.5% of Malaysia’s Gross Domestic Product (GDP). The RM20 billion Economic Stimulus Package 2020 was launched on Feb 27 by then-interim Prime Minister Mahathir Mohamad. On 27 March 2020, Malaysia Prime Minister, Tan Sri Muhyiddin Yassin announced a Second Economic Stimulus Package 2020 (ESP2) themed Prihatin Rakyat to mitigate the economic impact of the Covid-19 outbreak in Malaysia. ESP2 was driven by three core objectives: protect the people, support businesses and strengthen the economy involving multiple sectors such as banks, utilities, telecommunications, insurers, and retirement savings.

ESP2, valued at RM250 billion, includes:

  • RM128 billion for the protection of citizens’ welfare
  • RM100 billion to support small and medium enterprises
  • RM2 billion to strengthen the country’s economy
  • RM20 billion to pursue measures announced under Economic Stimulus Package 1.

It is not surprising that the ESP2 came exactly one month after the First Economic Stimulus Package 2020 (ESP1), valued at RM20 billion, was announced on 27 February 2020. Since the ESP1, Malaysia recorded over 2,000 positive cases and 24 deaths due to Covid-19 and is presently under a movement control order (MCO) since 18 March 2020. Also, Covid-19 outbreak is reported in almost every country around the world with the United States of America topping the list, surpassing China! The negative effects of Covid-19 outbreak and MCO are greatly felt by Malaysian citizens and the business community.

Hence, ESP2 added RM230 billion allocation to the stimulus package, after ESP1 RM20 billion announcement, which brings a total to RM250 billion. It is hoped that ESP2 will be able to spur the economy going forward. Let’s have a closer look into the breakdown for each sector:

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Second Economic Stimulus Package 2 (ESP2)

  1. Social welfare: RM10 billion allocation for one-off payment to support both B40 (40% low income group) and M40 (40% middle income group) households.
    • One-off RM1,600 financial assistance for four million households earning RM4,000 per month and below
    • One-off RM1,000 financial assistance for 1.1 million households earning between RM4,000 and RM8,000 per month
    • One-off RM800 financial assistance for unmarried individuals earning RM2,000 per month and below
    • One-off RM500 financial assistance for 400,000 unmarried individuals earning between RM2,001 and RM4,000 per month
    • One-off payment of RM500 for civil servants including contract workers in April
    • One-off RM500 assistance for retired civil servants in April
    • One-off RM200 financial assistance for higher education students in May
  1. Social welfare: RM25 million allocation for vulnerable groups for food, health and shelter assistance.
  2. Social welfare: RM3.2 billion under Bantuan Sara Hidup will be given out in July 2020.
  3. Assistance: RM1,500 of pre-retirement funds can be withdrawn from Account B of private retirement scheme without any tax penalty between April and December 2020.
  4. Healthcare: RM1 billion additional allocation for Ministry of Health to purchase medical equipment.
  5. Healthcare: RM8 million fund to cover Covid-19 testing costs of up to RM300 for all insurance policy and takaful holders.
  6. Front liners: Increase special allowance for medical personnel from RM400 to RM600 starting April 1, 2020 until the outbreak ends.
  7. Front liners: RM200 allowance for members of the police, military, customs, immigration, RELA and civil defense forces that are involved in enforcement of MCO.
  8. Front liners: One-off financial assistance of RM500 for 120,000 e-hailing drivers with RM60 million allocation.
  9. Utility: RM530 million allocation to provide 15-50% discounts on electricity bills for usage of up to 600kw for a period of six months from April 2020.
  10. Utility: Free internet for all users starting April 1, 2020 until end of MCO with RM600 million allocation.
  11. Utility: RM400 million investment to ensure efficiency of telecommunication infrastructure during MCO period.
  12. Food supply: RM100 million allocation to set up storage and distribution food centers.
  13. Food supply: RM64.4 million for farmers and fishermen associations that are not able to produce food between 3-6 months to ensure food security.
  14. Food supply: RM110 million allocation for 80,000 workers involved in sanitation and food supply in schools, higher education institutions, public training institutions and other agencies.
  15. Moratorium: 6-months deferment for housing loan, car loan, personal loan and SME loans.
  16. Moratorium: Interest income and profits of banking institution derived from financing facilities covered under the 6 months moratorium shall only be taxed upon receipt after the moratorium period.
  17. Insurance: Deferment of insurance premium payment for those affected by the Covid-19 outbreak.
  18. Projects: Projects to be executed including infrastructure projects at FELDA settlements (RM600 million), repair and upgrade of schools in Sabah and Sarawak (RM350 million) and repairs for housing for the poor (RM150 million).
  19. SME: Introduction of Wage Subsidy Program to subsidize affected employers RM600 per month for each employee earning less than RM4,000 for a period of 3 months.
  20. SME: RM4.5 billion for SMEs, micro entrepreneurs comprising of an additional allocation for special relief facility (RM3 billion), allocation to improve access to financing for SMEs (RM1 billion) and funds for micro credit schemes (RM500 million).


Additional Economic Stimulus Package 2020 was announced on April 6, 2020 targeting to ease the impact of Movement Control Order (MCO) on small medium enterprises (SMEs).

Below are some of the highlights for SME business owners in Malaysia:

  1. Government provides additional assistance for SMEs amounting RM10 billion
  2. Salary subsidy for SMEs has been expanded to RM13.8 billion from RM5.9 billion, with additional measure for all SME sizes (from under 75 employees to over 200 employees)
  3. Landlords are urged to provide rental discount of 30% to SMEs during MCO and 3-months post MCO to receive tax break for April-June period
  4. Foreign worker levy cut by 25% for those with permit ending Dec 31, 2020 but discount not applicable to domestic helpers
  5. Special grant of RM3,000 each for eligible micro businesses registered with Inland Revenue Board amounting to RM2.1 billion for 700,000 micro businesses
  6. Financial service providers registered under Moneylenders Act 1951 to provide 6-months moratorium for SME loans from April 2020
  7. Employers advised to approach Human Resource Department to discuss employee contract terms, such as salary cut, no paid leave during MCO