How will the Covid-19 outbreak affect Budget 2021?

By Poovenraj Kanagaraj

“I imagine that more allocation will be given to the healthcare sector especially when the vaccine is not ready and we cannot risk another wave of infection in the new year,” Fellow in the Economics, Trade and Regional Integration (ETRI) Division of ISIS Malaysia, Juita Mohamad tells Business Today.

She further adds that more allocation may be given for SMEs, household cash transfers and wage subsidies to help businesses, households and workers, if the economy does not expand as much as the pre-MCO rate by early 2021.

While issues related to housing cost and declining tax collection have been brought up after Budget 2020 was tabled, Juita believes that the government will continue to address these issues as they have been recurring throughout the years.

“We have seen that many issues have been more pronounced with the spread of the virus and the MCO. These issues include cost of housing, optimal tax rate, cost of living, quality of our education system, foreign workers and immigrants,” Juita shares.

However, she points out that what could be different in the upcoming Budget is the share of allocation for education for example assuming that limited resources are prioritised for healthcare, SMEs, household cash transfers, wage subsidies and infrastructure in the new year.

Bank Islam Malaysia chief economist,  Mohd Afzanizam Abdul Rashid says his concern in regards to Budget 2021 lies in the premature tightening of the government’s budget as the economy might see a turnaround next year. “The fiscal consolidation has to be done gradually,” he added.

He further believes that there would also be an allocation on development spending to spur private investment in the country.

IDEAS research manager, Lau Zheng Zhou on the other hand expresses a similar train of thought as ISIS Malaysia fellow, Juita did.

“The government has to ensure demand capacity is met for medical supplies and assuming if MCO is not ending by this year, development expenditure has to be considered as well,” he says.

While allocation for education always appears as one of the biggest every year, Lau says as most of the budget are spent on teachers, this year the government will have to look into training the teachers to come up with a syllabus to fit the online learning experience and to perhaps even introduce personalised coaching sessions.

The government will also have to re-imagine the way we work and will have to figure out on how to use the spending to push businesses and employees on to digital platforms, Lau points out.

While past concerns will remain, importance should be placed on focusing on the future, Lau says. He adds that the government’s role is to provide for an environment that works for all to survive in.

“And this can be translated into enhancing competitiveness, education and clean energy for instance,” he concluded.

 

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