Budget 2021 recognises the need for continuous support to lives and livelihoods during a period when Malaysians, especially those in the bottom 40 per cent of the household income (B40) group are under enormous stress caused by the COVID-19 pandemic.
World Bank Group lead economist Richard Record said the budget emphasises on inclusivity with further measures to sustain social protection support to the vulnerable, including the expansion of the benefit levels and beneficiary coverage of various existing and new cash transfer programmes such as the ‘Bantuan Prihatin Rakyat’.
“Clearly this is the right time to sustain a counter-cyclical stance until a recovery is underway,” he said in a statement.
Record said measures to bridge the digital divide, including via the broadband subsidy, as well as allocation to the National Digital Infrastructure Plan were also steps in the right direction.
“Like governments around the world, Malaysia’s Budget 2021 attempts to strike a balance between providing support to lives and livelihoods today, with investing in growth and an economic recovery tomorrow,” he said.
On employment, he said several new measures were introduced for upskilling, reskilling, and the employment and re-employment of workers, with emphasis on specific groups of workers, including the youth, long-term unemployed, disable and those who have lost their jobs during the crisis.
“Extension of job search allowance by three months provides an enlarged safety net for retrenched workers as they seek re-employment, hence, these are useful steps in promoting job creation and re-employment which are important to facilitate a recovery from the crisis,” he pointed out.
However, he said necessary fiscal responses to the ongoing crisis, coupled with a persistent decline in government revenue would pose a challenge to the medium-term fiscal outlook.
“Like governments across the world, Malaysia has depleted much of its available fiscal space and will exit the crisis with a larger burden of debt and contingent liabilities.
“This resulted in difficult intertemporal constraints for the government to further expand expenditures on relief and consumption-supporting stimulus over the near term, which may leave the government less equipped to invest in lasting recovery and growth,” he said.
As such, he applauded the announcements of several medium-term fiscal reform initiatives, including the development of the Medium-term Revenue Strategy, to address the fiscal legacies of the crisis, and to enhance the government’s revenue capacity to sustainably finance Malaysia’s long-term sustainable and inclusive growth agenda.
Richard expounded that country’s economy continues to be based on sound fundamentals and Malaysia has the necessary depth in resources and competitive advantages to emerge stronger from the crisis.
Thus, he said Budget 2021 would be an important milestone in the country’s efforts to recover from COVID-19, while the path to an economic recovery is subject to continued downside risks.
Meanwhile, Moody’s Investors Service, in a separate statement, said the budget would continue to aid economic recovery from the large coronavirus-induced shock, particularly the ongoing wage subsidies and financial assistance to households and small and medium enterprises.
“Moody’s expects Malaysia’s real gross domestic product growth to rebound to more than seven per cent next year, from a contraction of around 5.0 per cent to 5.5 per cent this year,” it said.
However, it said the still-wide deficit for 2021 would increase the government’s fiscal consolidation challenge over the next few years and imply a backloading of efforts to reduce its debt burden over the year 2022 and 2023.