Malaysia will continue pump-priming its coronavirus-battered economy, with Budget 2021 unveiled yesterday being the nation's largest ever, in a bid to reverse its first recession in over a decade.
The projected 5.4 per cent deficit for next year is lower than this year's 6 per cent - which is in part due to a shortfall in revenue by 7 per cent to RM227.3 billion (S$74 billion) this year.
The government's total expenditure is projected to top RM322 billion (S$105 billion) next year, 2.5 per cent more than this year, despite several stimulus packages announced this year.
Prime Minister Muhyiddin Yassin had said earlier this week that his administration's first budget will be expansionary, in line with bipartisan calls to rescue citizens and businesses, given that gross domestic product is expected to shrink by 4.5 per cent this year, the first contraction since 2009.
The economy is projected to rebound with growth of between 6.5 per cent and 7.5 per cent next year.
Malaysia's King, Sultan Abdullah Ahmad Shah, has in recent weeks repeatedly called on lawmakers to back the budget to ensure the fight against Covid-19 is well funded.
This comes amid growing uncertainty since September over Tan Sri Muhyiddin's majority, which was already razor-thin at the last parliamentary sitting in August, with just 113 out of 222 MPs in the government bench.
"This is an unprecedented crisis... described as the worst economic crisis since the 1930s' Great Depression," Finance Minister Tengku Zafrul Aziz said when tabling the budget.
"We can argue and disagree on secondary issues, but we should unite to agree on principle."
Among initiatives to ease the public burden are cash handouts to 8.1 million recipients worth RM6.5 billion, as compared with Budget 2020's RM5 billion for 4.3 million beneficiaries.
A new RM3.7 billion jobs scheme to subsidise up to 40 per cent of wages is expected to create 500,000 new opportunities.
However, analysts believe the budget lacks substantive measures to overcome the continuing impact of the pandemic.
"Any expansionary budget will spur the economy. But it lacks a plan for sustainable and equitable growth to repair the damage suffered and imbalances exacerbated due to the Covid-19 pandemic," Kenanga Investment's head of economic research Wan Suhaimie Saidie told The Straits Times.
Malaysia has announced four stimulus packages so far this year, to soften the economic impact of Covid-19-related shutdowns, valued at RM305 billion.
A total direct fiscal injection of RM55 billion has led to the Finance Ministry nearly doubling the 3.2 per cent deficit forecast in Budget 2020, which was tabled last year. However, the deficit spike will see a huge increase in borrowings, as total revenue is only slightly more than the operating expenditure of RM226.7 billion and RM236.5 billion for this year and next year respectively.
According to the government's fiscal outlook report, funds raised for Covid-19 stimulus and development expenditure worth RM88 billion and RM85 billion this year and next year, respectively, will be financed with debt, up from RM54 billion in development spending for last year.
Kuala Lumpur is seeking to diversify further from a reliance on petroleum. The government forecasts just RM37.8 billion in total petroleum revenue next year, against the RM50 billion this year.
The sharp drop next year will be largely due to a lower dividend payout of RM18 billion from state oil giant Petronas, instead of the RM34 billion this year and RM54 billion last year.
Datuk Seri Zafrul also revealed that the Muhyiddin administration intends to proceed with the Rapid Transit System linking Johor Baru and Singapore, while "the government will also continue the High-Speed Rail Project or HSR as this project is expected to generate a positive multiplier effect to the country's economy. However, it is subject to further discussion with Singapore".