Budget 2021 generous but ‘safe’

graphic by MZUKRI MOHAMAD

BUDGET 2021 is a generous and broad-based budget for Malaysia, but it lacks the opportunity to be bold in facing enormous challenges ahead, experts said.

With a RM322.5 billion or 20.6% of GDP allocation, the budget is only RM7.8 billion extra from the revised estimated expenditure in 2020 of RM314.7 billion, after the original projection of RM244.5 billion swelled by RM17.7 billion.

In terms of per capita, it gives about RM244 each to 32 million Malaysians and when divided by 12 months — well, do the math.

Given the unprecedented health crisis, Dr Geoffrey Williams, an economist from Help University, said the budget is ordinary.

He said the structure is similar to that of previous budgets where money was earmarked for ministries, agencies, government-linked companies (GLCs), interest groups, projects, etc.

“I do not see how all the allocation would find its way into the economy because of the level of leakage in government expenditure.

“I think it is a very typical budget allocating money to interest groups, government agencies, GLCs and projects just like we have seen before. Nothing extraordinary.

“From a per capita perspective, the additional allocation of RM7.8 billion is very small. Even if we get it, we would not notice it,” Williams told The Malaysian Reserve (TMR).

Still, Williams commended the Budget 2021 with its increased allocations for low-income groups or the bottom 40% (B40), notably through Bantuan Prihatin Rakyat (BPR).

DM Analytics Sdn Bhd economist Zouhair Rosli said the budget missed the opportunity to be bold as narrowing fiscal space is not viewed as a priority in the next year or two.

“We have to spend first, then only think about revenue. Unfortunately, the government plans to go for a lower deficit next year from 6% to 5.4%. If we are to have an inclusive recovery next year, the government needs to spend more and worry less about the deficit or the self-imposed debt ceiling,” Zouhair told TMR.

Assoc Prof Dr Baharom Abdul Hamid, director of the research management centre at the International Centre for Education in Islamic Finance, described the budget as an investment for the rakyat and the nation.

“The budget seems to be built on pillars of prioritising people’s welfare, ensuring business continuity and strengthening the economy, though some sceptics might harp on the sustainability side of it being very positive on the recovery in 2021,” he told TMR.

Zouhair said the budget fell short of addressing the livelihood of the people by virtue of the amount which he deemed insufficient.

The economist said one-off cash assistance such as the BPR is not on a monthly basis, and while many other initiatives are in place, those who are self-employed seemed to be left out.

“Firstly, the self-employed or ‘Makcik Kiah’ (Auntie Kiah) are forgotten. For the employees, they can get a wage subsidy, but what about the self-employed?

“Secondly, the wage subsidy is not enough. It only covers 25% of the median wage,” Zouhair said.

He said the pandemic has put certain groups at risk of being left behind and making them more vulnerable than ever before.

However, Khazanah Research Institute chairman Tan Sri Nor Mohamed Yakcop said it is a broad budget with a wider net to help those who need it the most, the vulnerable. At a 5.4% deficit, he said it is still a very prudent number.

“There are a lot of uncertainties for next year. Covid-19 creates 10 times bigger uncertainties. I think the budget is done very well. It is the government’s first step before we have a better understanding of the future,” Nor Mohamed told TMR.