KUALA LUMPUR - Malaysia is planning an even larger recovery budget than it did for this year, with a 6 per cent deficit projected for 2022 set to lift its coronavirus-ravaged economy by between 5.5 per cent and 6.5 per cent.
At more than RM332 billion (S$108 billion), Budget 2022 unveiled on Friday (Oct 29) will be the nation's largest, surpassing the RM321 billion expected to be spent this year.
The 2021 deficit was initially planned at 5.4 per cent but a deepening Covid-19 crisis, which has seen more than 28,000 deaths this year, forced the government to unveil several rescue packages, and a shortfall of 6.5 per cent is now expected.
Gross domestic product (GDP), which shrunk 5.6 per cent in 2020, has rebounded in the first half of this year by 7.1 per cent, although growth is expected to slow to a full-year tally of between 3 per cent and 4 per cent for 2021, according to Finance Minister Tengku Zafrul Aziz.
"Next year, we must focus on a recovery for all socio-economic segments. Efforts to build resilience will be rolled out to strengthen business and healthcare capacity in facing coming challenges," he said when tabling the budget in Parliament.
Datuk Seri Zafrul has insisted that the government still needs an expansionary budget as fiscal consolidation could derail an economic recovery.
In The Straits Times Connect webinar last month, he said: "We understand that the Covid-19 situation is dynamic. We didn't realise in 2020 what will happen in 2021."
He added: "With vaccination, at least we know that 2022 has to be, and can be and should be, a recovery year. But the situation remains fluid and that's why we have to plan and pace ourselves."
Budget 2022 sees RM233.5 billion being allocated to operating expenditure, RM75.6 billion set aside for development, a top-up of RM23 billion to the Covid-19 fund, and RM2 billion reserved for contingencies.
However, the government wants to shore up revenue with a higher tax bracket akin to a corporate windfall tax. Earnings over RM100 million next year will be taxed at 33 per cent instead of the existing 24 per cent. Mr Zafrul said this "prosperity tax" would be a "one off" measure.
Corporate income tax, already the largest contributor to the Treasury, is projected to jump by 8.1 per cent to RM65.5 billion in 2022.
The increase will account for nearly 40 per cent of the growth in revenue to RM234 billion, 5.9 per cent higher than the RM221 billion this year.
Institute of Democratic and Economic Affairs chief executive Tricia Yeoh said the tax was a "bold" move but would be acceptable to the general public, although "we need to find the balancing point because we don't want the private sector and investors to flee."
KRA Group strategy director Amir Fareed Rahim also told The Straits Times the levy was timely given calls in the past year.
"Companies which are doing well must contribute more to the recovery efforts. By not limiting it to certain industries, it also allows the 'pain' to be shared. This is also a sign of confidence on the part of this government that Malaysia remains an attractive investment destination in the long-term," he added.
The Health Ministry is allocated RM32.4 billion - the second highest behind education - with RM4 billion dedicated specifically to address Covid-19 and to boost public healthcare capacity.
Some RM8.2 billion is set aside for direct cash aid to the most vulnerable, with the number of recipients estimated at 9.6 million, while RM4.8 billion in wage subsidies is aimed at securing 600,000 jobs. This is expected to bring unemployment down to 4 per cent from the 4.6 per cent last measured in August.
Total subsidies to reduce cost of living for items such as fuel and basic food items will amount to RM31 billion next year.
Financing worth RM40 billion will be prepared under a programme to rejuvenate businesses. This includes direct credit, guarantees and equity injection aimed at benefitting entrepreneurs running both big and small operations.
The government will also push for stronger female representation in boards by mandating that at least one woman director is appointed for all large public listed firms by Sept 1, 2022, and June 1, 2023 for other listed companies.
Although women make up a quarter of boards in the top 100 firms, about 27 per cent of the 252 public listed companies do not have female directors.
Since the pandemic hit early last year, Malaysia has launched eight relief plans worth RM530 billion, out of which RM80 billion has been direct fiscal injection.
The RM220 billion announced this year, with RM25 billion from the Treasury's coffers, has yet to be fully utilised, according to the Finance Ministry.
On Friday (Oct 29), another 6,060 new Covid-19 cases and 95 deaths were logged, bringing the total tallies to 2,460,809 and 28,769 respectively.
A helping hand
The Bantuan Keluarga Malaysia (Malaysian Family Aid) will dispense up to RM2,000 (S$648) for households with at least three children and a monthly income of less than RM2,500.
This is the highest amount of direct cash aid ever handed out by the government, larger than the RM1,800 disbursed this year.
Single parents earning up to RM5,000 monthly will also receive a RM500 top-up, while another RM300 will be handed to families with senior citizens.
Firms that hire unemployed Malaysians with a monthly salary of RM1,500 or more will receive subsidies amounting to 20 per cent of their wages in the first six months and 30 per cent of wages in the next six months.
The subsidy will be increased to 30 and 40 per cent respectively for the same periods if special needs people, aborigines, former convicts, single mothers and women who are unemployed for over a year are hired on monthly salaries of RM1,200 or more.
Aid for Covid-19 orphans
RM25 million will be used to care for over 4,700 children who became orphans after their parents died from the coronavirus.
Civil servants, pensioners
Aside from top-ranking civil servants, the other 1.3 million in the public sector will each receive RM700, while a million pensioners will be given RM350 each.
Young people aged 18 to 20 and all full-time tertiary students will each receive RM150 via e-wallet credit.
Car tax exemption
The sales tax exemption for locally assembled passenger cars will be extended to June next year. Imported cars will have half the sales levy waived.