AGAINST the backdrop of an uneven recovery with risk tilted to the downside, Malaysia’s Budget 2022 (to be tabled on Oct 29) is very much expected to remain accommodative with fiscal deficit projected to narrow slightly from 7% of gross domestic product (GDP) in 2021F (vs official projection of 6.5-7%) to 6% for 2022F.
Moreover, CGS-CIMB Research expects the expansionary budget to be supported by a RM45 bil increase in the COVID-19 Fund to RM110 bil and a higher statutory debt limit at 65% of GDP (vs 60% previously).
“We project statutory debt to hit 63.5% by end-2022F,” opined economist Lim Yee Ping in an economic update.
“We forecast Malaysia’s GDP growth to improve from 3.9% year-on-year (yoy) in 2021F to 5.6% yoy in 2022F thereby supporting an increase in fiscal revenue by 6.4% yoy or RM14.3 bil even if no new taxes are announced.”
This should provide the Government room to increase its operating and developing expenditure by 3.8% or RM11 bil to underpin domestic demand.
The COVID-19 fund is forecast to decline 20% from RM40 bil in 2021F to RM32 bil in 2022F (vs RM38 bil in 2020), focusing on targeted measures such as wage subsidies and workers’ hiring incentives for affected industries like tourism and retail as well as COVID-19-related expenses such as booster shots and antiviral pills.
Pro-growth measures in the form of fuel, liquefied petroleum gas (LPG) and cooking oil subsidies as well as targeted cash handouts (Bantuan Prihatin Rakyat) of up to RM1,500 for B50 households and single individuals are also expected to be to be extended.
Likewise, many of the initiatives to drive the recovery of economic sectors may be rolled over.
These include financing schemes for micro business and small medium enterprises (SMEs), extensions of Human Resources Development Fund (HRDF) levy exemption for affected industries, extensions of the Home Ownership Campaign (HOC), real property gains tax (RPGT) exemption by another year and personal income tax relief for expenses related to domestic tourism.
Initiatives to enhance resilience and sustainability in line with the 12th Malaysia Plan (12MP) and Share Prosperity 2030 Vision include reskilling and upskilling training programmes, loan funds and incentives aimed at enhancing digitalisation and automation as well as tax incentives/special reinvestment allowance to spur investments in selected strategic and high impact industries such as electrical and electronics (E&E), global services aerospace, creative, tourism, halal, smart farming and biomass. – Oct 25, 2021
