BUDGET 2020 will have to be expansionary to cushion the impact of external shocks stemming from global uncertainties, said Socio-Economic Research Centre executive director Lee Heng Guie today.

“The finance minister should adopt a pragmatic and responsive budget to external shocks.

“Last year was a year of sacrifice, this year is the year to ensure the economy remains resilient to counter any potential risk from the external side,” he said at the think-tank’s quarterly economic briefing.

Revenue sources to fund an expansionary budget could be derived from the sales and service tax, the RM54 billion special dividend from Petronas, savings and plugs on leakages from the government’s austerity drive, departure levy collection and gains from asset disposals, he said.

He added lowering the fiscal deficit to 3.2% of the gross domestic product (GDP) is more viable as opposed to the initial target of 3%.

“Still lower than this year which is 3.4%, but at least slightly higher compared to the original target which is 3%.

“(Government) should not be too obsessed with continuing reduce the deficit to what we desire but at least allow some room for an expansionary budget,” he said, adding that the government was expected continue efforts to consolidate its debt.

“Instead of being too engrossed in lowering the fiscal deficit, the government should focus on striking a balance in these turbulent times and manage trade-offs between supporting domestic demand, protecting social spending and ensuring an optimal mix of spending.

“The government must be both pragmatic and strategic in crafting the budget, (with it) being the final year of the 11^th Malaysia Plan (2016-2020) that is aimed at changing gears to spur economic growth, increase investment, create jobs and expand socio-economic development,” he said.

Asked if the national debt level will allow the government the leg room to spend, Lee said the current debt level is manageable as it is still below 55% of the GDP.

“More importantly you must spend on the right sector. If you can try to allocate more for development expenditure rather than the operating expenditure.

“For every one dollar, 98% goes to operating expenditure.”

According to projection, gross development expenditure is estimated to be at RM56 billion in 2020 from RM53.5 billion last year.

He said the government should target quick gain sectors that can improve multiplier effects and identify the right projects to allocate funds for.

“More allocations should be given to education, utilities, ports, healthcare, housing, digital infrastructure, tourism, industrial development and SME as well as the smart and green technology.

“The government should also look into the continuation of existing and potential new projects including the LRT3, MRT2, Pan-Borneo Highway and the Johor Baru-Singapore Rail Transit System Link.

“Some of the delayed implementation of 121 projects valued at RM13.93 billion earmarked for 2019 due to the adoption of open tender as well as implementation capacity constraint, will be carried forward into 2020 and beyond.”

Putrajaya is told to look at job preservation and creation, uplifting productivity and manpower, revitalising private investment, enhancing domestic consumption and easing property overhang pressure while crafting the budget.

The national budget for 2020 will be tabled in the Dewan Rakyat on October 11. – September 24, 2019.