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Budget 2021: Ushering in the New Economic Paradigm

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Executive Summary

The devastating economic effects of the Covid-19 pandemic were made painfully clear by Malaysia’s Q2 GDP growth numbers, with a drop of 17.1%. Arguably, the drop would have been even larger were it not for the emergency support packages the government introduced in rapid succession in Q1 and Q2. 

Now with those short-term support packages about to expire, a heavy responsibility rests on the Budget 2021. It should aim to ensure the short-term revival of the economy, but also start the transformation to an economy that fixes the major flaws that were exposed by the pandemic.

Fortunately, there is a silver lining. Since the difficult economic conditions apply across the globe, any negative implications from budget deficits or higher public debt will not apply in this cycle. 

The government therefore has the fiscal space to support the economy in the short term, and to start implementing measures and programmes that will move the economy to a greener, more sustainable and more equitable future. 

In this, we see the government as a catalyst, using public investment in sectors critical to the future to precipitate private investment, and the resulting jobs and higher added value.

This paper outlines first of all our reasoning regarding the fiscal space available to the government, and then proposes focused measures designed to create good jobs, and at the same time orient the economy towards a higher added-value and greener future.

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