Govt has fiscal space to introduce new injections

by BERNAMA / graphic by MZUKRI MOHAMAD

THE government still has the fiscal space to introduce substantial new injections, as suggested by the Strategic Programme to Empower the People and the Economy or Pemerkasa package introduced recently, which mostly extends the existing measures, said think tank Research for Social Advancement yesterday.

Its researcher Jaideep Singh said the way out of the pandemic-induced contraction is to implement more directed, strategic expansionary fiscal policy measures to promote consumption and crowd-in private sector investment, not to make unsubstantiated claims about the government’s fiscal situation.

“Now is not the time for alarmism. We can already expect an increase in government revenue beyond Budget 2021’s forecast, with Brent crude oil climbing to over US$60 (RM247.80) per barrel yesterday from the US$42 per barrel assumed during the preparations for the budget,” he said.

Jaideep said a simple way to contextualise the government’s fiscal health was to look at the overall fiscal balance on the difference between government revenue and expenditure as a share of GDP.

“Granted, the stimulus measures have led to higher spending amid a smaller revenue base, with the estimated fiscal balance standing at 6% of GDP in 2020 and potentially rising to 6.5% this year from 3.4% in 2019, according to the Economic Outlook 2021,” he added.