By Shankaran Nambiar
These are difficult times, and with the Covid numbers continuing to be high, there is much expectation that Budget will do the right thing in setting the economy right.
The last year was not a good year for growth and this year is not likely to be very promising either, though it is definitely expected to harvest better gains. As the economy opens up, and although the number of deaths remains in the region of 200-300 on a daily basis, we can expect the economy to improve.
Nevertheless, 2022 will see a recovery of the economy, definitely higher than the 3-4% GDP growth that is probably in store for this year.
Two points will have to be kept in mind as Budget 2022 is being prepared: first, that the economy has been badly beaten, and second, that the economy has to be driven back to recovery.
In other words, policymakers have to repair the wounds created by the pandemic and at the time work towards growth.
If the repair and regeneration principle is taken seriously and supported by prudent fiscal and monetary policies, we can very well expect growth to rebound to about 5.5% in 2022.
Repairing and regenerating the economy requires an expansionary budget. The finance minister, Tengku Zafrul, very correctly recognises that it is necessary to continue being on an expansionary path, even if it might mean taking on a bigger deficit and more debt.
The question is whether Budget 2022 will go for enough and commit itself to a big enough deficit.
Zafrul has also very perceptively indicated that Budget 2022 would focus on tourism, retail and SME sectors. These are the sectors that were worst hit by the succession of MCOs and it would reason to pay particular attention to them, thus helping with their repair and mending them so that they return to a state of vibrance.
12MP has laid the broad dimensions for national development in the next five years. The Plan document has taken into account that while immediate demands must be met, the long-term recovery and growth of the country cannot be ignored.
It would not be wrong to say that we have wasted about four years because of political instability and due to the negative impact of Covid. Now is the time to start rebuilding the economy and Budget 2022 is one of the instruments that will be useful for that purpose.
On the expenditure side, one can expect Budget 2022 to prioritise women’s empowerment, workers in the informal sector, and those segments of the population in the B40 group.
As far as the private sector is concerned, the Budget should direct its efforts towards the MSME sector, with special emphasis on the micro-enterprises.
The income side is likely to be more challenging since the sources of government revenue will be limited.
The government will not want to introduce any drastic tax measures in view of the fact that all sections of the private sector have been negatively impacted due to the pandemic. The private sector will not be able to bear the additional burden of higher taxes.
In any case, we can be sure that Budget 2022 will be designed to be a caring budget.
Dr. Shankaran Nambiar is head of research at the Malaysian Institute of Economic Research. The views expressed in this article are his own.
