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UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting assessed the Budget 2021 figures in Malaysia.

Key Quotes

“Budget 2021 carries significantly more expansionary and inclusive measures to steer the economy out of a recession towards post-recovery growth under the new normal. The outlays for government expenditure totals MYR322.5bn (or 20.6% of GDP) in 2021 with a record development expenditure allocation of MYR69.0bn and a dedicated COVID-19 fund worth MYR17bn for stimulus packages and recovery plans.”

“All short- and medium-term measures announced in this budget are crucial in supporting the economy from crisis to recovery, provide further impetus for economic growth which is targeted at 6.5%-7.5% in 2021 (2020F: -4.5%), and help narrow the economic and social divide exacerbated by the pandemic. Notable measures announced include further cash assistance for the B40 group, lower income tax for middle-income group, extension of wage subsidy program, higher medical tax relief, restart of key infrastructure projects, and further investment incentives.”

“To manage fiscal risks, the government has established fiscal reform initiatives and formulated a new Act that allows for temporary financing and implementation of fiscal response measures. As such, the debt ceiling has been temporarily raised to 60% of GDP until end-2022 to allow sufficient fiscal space during the period of fighting the COVID-19 pandemic. The fiscal deficit is projected to decline to 5.4% of GDP in 2021 (from an estimated 6.0% in 2020).”

“Given the sizeable public outlay, efficient spending and execution remains key for the successful implementation of Budget 2021 measures to revitalise the economy. A special unit under the Ministry of Finance (LAKSANA) is tasked to ensure effective and efficient implementation of the initiatives under the stimulus packages. Members of Parliament (MPs) will vote to pass the budget on 23 Nov.”