BUDGET 2021 will likely be expansionary on a targeted basis to sustain economic revival amid the Covid-19 pandemic, said the Socio-Economic Research Centre (SERC).

The think-tank’s executive director Lee Heng Guie said in a quarterly economic briefing today that Putrajaya’s spending is expected to be targeted to ensure that the sectors which receive the allocation are able to create a multiplier effect.

Putrajaya should also prioritise on programmes and protection for the B40 households to boost their purchasing power, spur domestic and foreign direct investments and create more jobs through upskilling and reskilling.

The government should focus on areas, such as digitalisation, healthcare, industrial development, agriculture and entrepreneurship to empower the youth and women, said Lee.

Perikatan Nasional will table its maiden budget on November 6.

“This year’s (budget) is very important given that we continue to fight the Covid-19 impact on the broader economy,” Lee said.

The spending plan formulated during the recovery movement-control order period will look into sustaining the recovery until a vaccine is found.

He also expects the fiscal deficit for 2020 to widen to between 5.5% and 6%.

Now that the government has raised the self-imposed statutory debt ceiling from 55% to 60% of GDP, it may borrow RM70-75 billion more based on a nominal GDP value of RM1.4-1.5 trillion.

“It’s now up to the federal government to flex its fiscal spending power. How much budget deficit spending and debt is it willing to commit to in the tabling of 2021 Budget on November 6?,” he said

Lee added economic stimulus packages worth more than RM300 billion have helped stabilise the   economy and see it through these challenging times. 

“Malaysia’s economy is in the early stages of recovery and we still need very strong and impactful fiscal support to prevent the recovery from turning anaemic given the increasing concerns over the occurrence of a second or third wave (of infection).

“If you were to draw back the spending now it could trigger an even bigger contraction in the private sector if the sector has not fully recovered to take up the slack.”

He said impactful policies should be the government’s main focus going forward. – October 6, 2020.