BANK Islam Malaysia expects the Budget 2021 to be expansionary to help the country recover from the effects of COVID-19.
“We anticipate that the fiscal deficit to remain sizeable at 6.5% in 2021 from an estimated 7.1 in 2020 (2019: -3.4%),” said its chief economist Dr Mohd Afzanizam Abdul Rashid in a Budget 2021 preview.
This, he said, is due to the economy improving gradually compared to the first half of 2020 where the fiscal deficit was at 7.9% of GDP.
“The Ministry of Finance, has thus far, forecast that fiscal deficit target to be at 5.8% to 6% of gross domestic product (GDP) in 2020. However, we foresee that these figures may be revised upwards.”
Bank Negara Malaysia in August, has revised its official GDP forecast for 2020 to between -3.5% and -5.5%, mainly due to changes in world growth forecasts and unprecedented length of the movement control order.
Mohd Afzanizam further noted that in line with the expansionary budget, the Bank sees operating expenditure (opex) to likely rise to RM269.8 bil in 2021 from an estimated RM264.5 bil in the current year as the government continues with its pandemic relief and stimulus packages .
To date, the Government had announced six stimulus packages amounting to over RM300 bil to keep the nation going while doing its best to keep the pandemic in check.
Aside from this, Bank Islam expects expenses for development to also escalate by RM5.5 bil from an estimated RM54.8 bil this year to RM60.3 bil next year.
“We believe the higher development expenditure is likely due to the Government’s aid to revive the sectors that are most affected by the pandemic, in particular the construction sector,” he observed.
Elaborating further, Mohd Afzanizam pointed out that the construction sector plunged 44.5% during the June quarter this year.
It was reported that the construction industry sustained RM18.5 bil losses during the initial phase of the movement control order between March 18 and April 28.
Citing the Construction Industry Development Board data, Minister in the Prime Minister’s Department (Economy) Datuk Seri Mustapa Mohamed has reportedly highlighted that of 7,590 construction sites surveyed nationwide from April 20 to Sept 20, 149 sites still had not resumed operations.
Of the 149, he was quoted as saying that 45 were still closed due to financial issues. – Nov 6, 2020
