Budget 2022 is an expansionary budget that is crucial to support the economy that is beginning to turn the corner although economists chimed in to say it was imperative that the execution of the expenditure was crucial in ensuring its success.
Sunway University Business school Professor, Dr Yeah Kim Leng says an expansionary budget would mean that the government would increase expenditure that would have a positive multiplier on the economy.
In addition, no increases in taxes will bolster consumer demand and this would further increase investment in businesses that would have an overall positive impact on the economy.
The government’s continued support of the economy was crucial as the country was only able to restore normalcy at the beginning of the fourth quarter. “Different countries in the world were returning to normalcy at different times and the level of support from the government would depend on how quick these countries were returning to normal,” Dr Yeah says.
Executive Director of SERC, Lee Heng Guie says that Budget 2022 unveils s strategic thrusts and measures to generate growth and create jobs as well as manpower retraining.
He says Budget 2022 also saw incentives and initiatives to facilitate business transformation through investing in smart digital technologies, and forward-looking investments, green transition, embracing the Environmental, Social, and Governance (ESG) business practices and 5G infrastructure for a better, sustainable, greener and more innovative future.
Lee however wonders if the ministries and agencies have the capacity to effectively implement and disburse the record high level of expenditure.
He says that past records have consistently shown a shortfall in the expenditure of about 8-10% in 2020-2021; 11-16% in 2013-2016 due to weak execution.
“Expansionary spending will not necessarily lead to a positive impact on economic output and income growth if the multiplier effect is restrained by inefficiencies, delay in implementation, and cost overrun,” he says.
Another economist in a bank-based broking firm expressed his concerns on a high percentage of operating expenditure that was difficult to come down and would start “eating into the development expenditure”
The federal government’s allocation for 2022 expenditure will increase by 3% or RM9.6 billion to RM332.1 billion compared to RM322.5 billion allocated for this year – making it the biggest ever allocation in Malaysia’s history.
According to the government’s 2022 budget will be 20.3% of the total GDP where RM233.5 billion or 70.3% will be channelled to Operating Expenditure (OE), RM75.6 billion (22.8%) for Development Expenditure (DE) and the balance of RM23 billion for the Covid-19 Fund.
