Kuala lumpur: The government’s special announcement on direct fiscal measures are expected to have short- to medium-term impact on the country’s economy, particularly in private consumption, inflation, and fiscal conditions, according to Bank Islam Malaysia Bhd (BIMB).

According to BERNAMA News Agency, the bank believed these timely interventions came at a crucial time as the economy faces mounting external headwinds, including the potential hike in United States (US) tariffs, disruptions to global supply chains from escalating trade tensions, and weakening global demand.

The bank noted that domestic consumption indicators have also begun to show signs of softening. However, the injection of RM2.0 billion or about 0.1 percent of gross domestic product (GDP) into household budgets is expected to provide immediate support to consumer spending, particularly for the B40 households.

With cash assistance available from August 31, retail sales figures are likely to improve beginning in September. This could help reverse the recent slowdown in consumer activity, with positive spillover effects for businesses, which may also be reflected in the month’s wholesale trade data.

On Wednesday, the government introduced several measures to ease the cost of living and boost household disposable income, including a one-off RM100 aid under the Sumbangan Asas Rahmah (SARA) programme, a freeze on toll hikes for 10 highways, and a targeted subsidy bringing RON95 fuel price down to RM1.99 per litre.

According to BIMB, although the one-off measures could result in additional fiscal spending of around RM4.4 billion, the fiscal deficit target of 3.8 percent for 2025 remains intact. This is supported by an expected RM5.0 billion uplift in revenue from the expanded Sales and Service Tax, which should offset the additional outlays. The impact on the gross issuance of Malaysian Government Securities and Government Investment Issues is expected to be neutral.