Clearer direction needed for Budget 2021

DESPITE believing that the key measures presented in Budget 2021 are balanced in its coverage of the vulnerable segment of the population and business activities, Institute for Democracy and Economic Affairs (IDEAS) said that the Budget 2021 falls short on providing a strong and clear direction as to how the country can prepare for an economic rebound.

Its research manager Lau Zheng Zhou said: “There were indications in the Budget 2021 speech which suggested how we can reset our economic model, but it does lack imagination, considering the scale of disruption that the twin health and economic shocks that we are facing as a country.”

Lau said that a new social security plan is needed for informal workers, especially those from the gig economy.

“They are not exactly employees, so they have no access to companies’ medical benefits or health insurance. The government should also consider a separate financial assistance programme for the most vulnerable segment of the population, say, interior Sabah and Sarawak,” he added.

Lau also noted that there were various financial assistance programmes, but the most vulnerable ones deserved a separate programme to address their unique conditions.

Meanwhile, Maybank Investment Bank Bhd (Maybank IB) chief economist Suhaimi Ilias said that Budget 2021 was in line with the investment bank’s expectations of an expansionary budget, given the record-breaking total spending allocations of RM322.5 bil from the previous record of RM317.5 bil in 2019.

Consequently, the budget deficit will remain sizeable in 2021 at RM84.8 bil, which is not much of a change from the RM86.5 bil deficit estimated for 2020, he told Bernama.

“So, fiscal stimulus momentum is sustained in that sense. As usual, the concern is whether the budget is enough.”

Suhaimi said revenue is expected to increase 4.2% to RM236.9 bil in 2021, so the government has to finance the shortfall for the RM322.5 bil budget through borrowings.

He noted that there were ample – and cheap – domestic liquidity, thanks partly to Bank Negara Malaysia’s measures to reduce interest rate and inject liquidity into the economy, such as the Statutory Reserve Requirement cuts and purchase of government securities in the bond market.

“I understand that voting on Budget 2021 will be on Nov 25, so we’ll see what happens then. Hopefully the politicians will put the people and the country first ahead of politics,” he said.

Furthermore, the parliament has also approved the raising of the statutory limit on government domestic debt to 60% of gross domestic product (GDP) from 55% of GDP, providing room for higher borrowings.

“Whether there is a need to raise the current ceiling of 60% of GDP depends on how the economy pans out over the next 12 months,” said Suhaimi, adding that economic growth outlook for next year is dependent on the COVID-19 pandemic developments, policy and politics. – Nov 15, 2020

Share on facebook
Share on twitter
Share on whatsapp
Share on email

Subscribe and get top news delivered to your Inbox everyday for FREE