The government believes that Malaysia’s economy would fare better next year against the backdrop of the Covid-19 pandemic and economic downturn.
However, several experts, who discussed the budget in a webinar organised by the Institute for Democracy and Economic Affairs (Ideas) this morning, were sceptical on the reality of Putrajaya’s expectations.
In its Budget 2021 tabled by Finance Minister Tengku Zafrul Abdul Aziz in parliament yesterday, the Perikatan Nasional administration projected that the country’s revenue would increase to RM236.9 billion, compared to RM227.3 billion expected this year.
“For 2021, our economy is expected to recover and expand at a rate between 6.5 and 7.5 percent,” the minister had told the Dewan Rakyat.
A senior fellow at Ideas, Carmelo Ferlito, said that was rather optimistic.
“I think that target can be achieved only if we can get rid of Covid-19 tomorrow and open the country’s border tomorrow.
“I think we agree that it is not going to happen. A rebound by seven percent next year is pretty unrealistic,” he added.
According to the economic scholar, such a high rate of rebound would not be achievable given that the economy is not doing well and the business sentiment in the country is also not positive.
Responding to a question on what he thinks the figure would be like next year, Ferlito gave a rather grim outlook.
“Ceteris paribus (all other things being equal) – if the situation on Covid-19 and borders remain as it is – I think that the economy won’t grow more than one percent or two percent, looking at it optimistically.
“The fiscal revenues will be affected by this, but for a precise figure we need an accurate calculation,” he said.
Former Permodalan Nasional Berhad chief executive officer Jalil Rasheed stressed that businesses had been suffering since the past few months.
This makes the government’s revenue projection as “rather optimistic”, he said.
Jalil said the country is an “externally dependent” nation, and the government must prepare to reopen its economy within the constraint of the pandemic.
“One thing needs to be noted for the government, it must operate under the assumption that Covid-19 vaccine will take years.
“It might be developed in the next six months, but we have seven billion people (in the world), and everyone wants it. (Malaysia must factor in the) cost and distribution realistically. We must prepare relatively early on how to reopen the economy within the constraint of this pandemic hanging above us,” he said.
Jalil claimed that this was an aspect which the budget proposed yesterday was lacking.
While there were many initiatives, especially for the low-income group, he added that the proposal lacks the “general direction of how the country would look like over three to five years”.
Economist Barjoyai Bardai of Universiti Tun Abdul Razak said the operating expenditure of 73% in the budget was way too high.
“The government’s expenditure has kept going up and it would need additional money to administer the civil sector,” he said, referring to the administrative budget that has gone up 2% compared with last year.
“The budget also shows the government has some constraints in its cash flow as it has to borrow 26% of the total budget. This shows the government has exhausted its revenue,” he was quoted as saying.
Bardai was disappointed that there were insufficient allocations for retraining and reskilling of the Malaysian workforce, which was being threatened by automation, adding that many workers would be made redundant in the process.
“I was hoping Putrajaya would spend at least RM20 billion to prepare the workforce for Industrial Revolution 4.0 as many companies move into automation,” he said.
On the various cash handouts announced in the budget, Bardai believed the amounts were inadequate and that the government would definitely be required to pump in more cash to help the lower-income group next year.