Will Budget 2020 kick-start the shared prosperity agenda?

The SPV 2030 seeks to reduce disparity between races and regions with special attention to the poor

pic by RAZAK GHAZALI

THE government will table its proposed spending for next year later today as the country braves a world dogged with global trade chaos, unilateralism and growing concerns over social wellbeing and thinning safety nets at home.

Finance Minister Lim Guan Eng, who will table the budget for the second time, faces a stern test as calls clamour for an expansionary budget to ensure growth during a time when balancing spending and revenues seem harder than walking a tightrope.

The government aims to reduce its fiscal deficit gradually, which currently stands at 3.7% of GDP in 2018.

Tun Dr Mahathir Mohamad-led government has to strike a balance between its longstanding agenda of reducing the fiscal deficit and progrowth spending to avert economic fallout due to a possible global recession.

The International Monetary Fund has warned of a “precarious” 2020 and lowered its global GDP growth projection to 3.2% in 2019 and 3.5% next year.

The US-China trade spat, a sudden economic slowdown in China and no-deal Brexit are among potential land mines. Malaysia, as a trading nation, will not be spared of the turbulence.

Analysts agreed that Budget 2020 will reflect more of the recently launched Shared Prosperity Vision 2030 (SPV 2030) blueprint, a long-term roadmap which would elevate the country to another level starting from 2021.

A source said the Budget 2020 would centre on the shared prosperity vision despite the blueprint having a 2030 roadmap. The SPV 2030 seeks to reduce disparity between races and regions with special attention to the poor.

Dr Mahathir was reported as saying that Budget 2020 will underline policies in line with the vision.

“The budget will be the starting point so that SPV 2030 will be able to be implemented fully in the 12th and 13th Malaysia Plans. By 2021, there need not be much aligning. In other words, in 2021 we will hit the ground running and pursue the shared prosperity vision full steam,” Dr Mahathir said during the SPV 2030 launch.

The source said based on Dr Mahathir’s statement, Budget 2020 would definitely take cognisant of the nation’s SPV 2020 and the budget “would be the start to help the country hit the ground running.”

Others, however, warned that the nation’s productivity needs to promote a knowledge-based and technology-driven economy.

Job opportunities, stagnating wages and rising cost of living are the main concerns at the grassroots level.

Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said an expansionary budget would be introduced for next year to stimulate the economy while keeping to the fiscal policy.

“We believe the government would introduce an expansionary budget for next year. Our estimate for the fiscal deficit is around 3.3% of GDP in 2020, which is higher compared to the government’s original target of 3%. This would be primarily driven by higher development expenditure as the government would want to stimulate the economy albeit subtly the commitment to contain the debt level,” Mohd Afzanizam told The Malaysian Reserve (TMR).

Malaysian Institute of Economic Research senior research fellow Dr Zulkiply Omar said the government should target on promoting and enhancing high value-added sectors, including electrical and electronics, as well as agriculture, particularly for small and medium enterprises.

“Entrepreneurial development shall also be given priority to help create jobs in the subdued environment,” he said.

DM-Analytics Sdn Bhd senior researcher Zouhair Mohd Rosli said the budget is expected to include measures to narrow the gap between urban and rural areas, and that of the rich and relatively poorer states.

“One of the important elements is to bridge the gap between rural and urban areas. I am expecting more development expenditure for the states such as Kelantan, Sabah and Sarawak, as the previous spending was highly skewed to the rich states,” Zouhair said.

As at 2018, GDP per capita for Kelantan was 69% lower than the national average, followed by Kedah (52% below average), Perlis (45% below average) and Sabah (42% below average) — all sit at the bottom bracket.

Zouhair said, for instance, money might be channelled to improve access to health facilities in rural Sarawak and treated water in parts of Kelantan.

He said Budget 2020, which is the last instalment under the 11th Malaysia Plan, is also expected to allocate funds to increase connectivity between urban and rural areas through infrastructure development including roads and transportation.

Last year, the government proposed a RM314.5 billion budget — 82.6% or RM259.9 billion for operations and 17.4% or RM54.7 billion for development.

Zouhair said short-term measures in the social sector such as housing, education and healthcare are deemed important to ensure shared prosperity among the people.

MIDF Amanah Investment Bank Bhd head of research Mohd Redza Abdul Rahman said the focus on the bottom 40% income group would feature significantly affordable housing and healthcare services.

“While we have seen a consolidation of nursing training centres, the upgrade and improvement in healthcare services, especially activities related to preventing major diseases, will likely be key. This preventive measure could give cost savings for treatment to the government,” Mohd Redza said.