Bolstering the domestic economy important in Friday’s revised Budget 2023

SHORING up domestic resilience and bolstering local businesses are some of the key pointers that investors who want to see in the revised Budget 2023 which is slated for re-tabling by Prime Minister (PM) Datuk Seri Anwar Ibrahim tomorrow (Feb 24), economists chimed in to say.

Amid external headwinds on the horizon and tepid exports anticipated this year, they view that Anwar’s unity government must incentivise the domestic economy – particularly the small and medium enterprises (SMEs) – and continue the crusade against corruption which would bode confidence among the foreign investors.

The slowdown in the external economies necessitates the domestic economy to be bolstered, especially SMEs which are the backbone of the Malaysian economy, according to Senior Fellow at The Malaysian Institute of Economic Research (MIER) Dr Shankaran Nambiar.

He said it is vital that sufficient incentives must be doled out to the SMEs that are reeling out from the pandemic as they constitute about 97.2 % of the total business establishments, generate about 38% of the GDP (gross domestic product) and provide employment for about 7 million people.

“Considering the SMEs being the backbone and the lack of support from the external sector in the anticipation of an economic slowdown, it is important that shoring domestic capability is given due priority,” he told FocusM.

Malaysia’s exports are expected to see slower growth in 2023 amid a weaker global economy. Shipments to advanced economies which are facing rising recession risks are expected to weigh on Malaysia’s trade, according to economists.

January exports had shown signs of weakening with growth coming in at 1.6% year-on-year (yoy) – below market expectation of a 7.4% yoy gain – and after expanding 5.9% yoy in the previous month.

The slower growth was due to fewer working days and milder global demand for goods. Import growth slowed to 2.3% yoy in January from 11.5% yoy in December 2022. Overall, the trade surplus narrowed by 2.1% to RM18.16 bil.

Hong Leong Investment Bank (HLIB) Research said the export growth was buoyed mainly by shipments of petroleum products and liquefied natural gas. “Malaysia’s trade momentum is expected to weaken going forward, constrained by the slowdown in final demand from major advanced economies,” projected the research house in a recent report.

Sunway University School of Business Professor Dr Yeah Kim Leng said Anwar who is also the Finance Minister must address the cost of living issues and continue his crusade against corruption which would bode well in inspiring investor confidence.

Dr Yeah Kim Leng (Pic credit:

While it is important to continue the fiscal consolidation efforts, Dr Yeah who is a member of a special advisory body to assist Anwar as Finance Minister said the government should also consider expenditures that would have the largest multiplier effect on the economy.

On the cost of living, Dr Yeah said that the revised budget must address issues revolving around the cost of living, particularly that affecting the B40 and the middle-income groups while ensuring that the needs of both group are taken care of.

An economist in a bank-base broking house said that although he expects the PM to address the issue of dwindling revenues through the introduction of GST (goods and services tax), it would not be done in the current budget due to political reasons.

However, he said that it needs to be looked into the future as oil revenues are expected to dwindle as the current prices of petroleum are set to ease, hence Malaysia needs to look for new sources of income.

“The GST would provide a valuable income to the tune of RM40 bil and it is an important source of revenue,” he added. – Feb 23, 2023

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